Gold’s remarkable rally has reversed sharply in recent months. After reaching an all-time intraday high of Rs 1,92,991 per 10 grams on the Multi Commodity Exchange (MCX) earlier this year, the precious metal is now trading near Rs 1,43,610, marking a decline of almost Rs 49,400, or roughly 26 per cent from its peak.
The steep correction has prompted investors and jewellery buyers to question whether prices have bottomed out or whether further declines are possible.
What Drove Gold to Record Highs?
Gold surged to unprecedented levels earlier this year as investors sought safe-haven assets amid escalating geopolitical tensions, concerns about global economic growth and expectations that major central banks would begin reducing interest rates.
Additional support came from strong central bank purchases, a weaker US dollar and tensions in West Asia, all of which contributed to pushing gold prices to record highs on the MCX.
Those supportive factors, however, have since lost momentum.
Why Are Gold Prices Declining?
The primary driver behind the correction has been the changing outlook for US monetary policy.
Markets now increasingly expect the US Federal Reserve to maintain higher interest rates for a longer period. Traders are currently pricing in three rate increases this year and assign a high probability to an additional increase in December.
Higher interest rates generally reduce the attractiveness of gold because it does not provide any yield or income. As bond yields rise, investors often move capital from gold into interest-bearing assets.
The strengthening of the US dollar has also added pressure on gold prices by making the metal more expensive for international buyers.
As a result, gold is on track for its fourth consecutive monthly decline, with international prices expected to finish the month more than 10 per cent lower.
Geopolitical Risks Have Had Limited Impact
Traditionally, geopolitical tensions support gold prices by increasing demand for safe-haven assets.
However, recent conflicts have had a different effect. Investors have focused more on the inflationary consequences of geopolitical developments than on the conflicts themselves.
Recent military exchanges involving the United States and Iran briefly lifted crude oil prices. However, expectations that both sides will continue diplomatic engagement regarding the Strait of Hormuz have limited the extent of safe-haven buying in gold.
Instead, higher oil prices have reinforced concerns that inflation may remain elevated, strengthening expectations that the Federal Reserve will keep monetary policy restrictive.
Could Gold Fall Further?
According to Axis Securities, gold managed a modest recovery after recent US PCE inflation data broadly matched market expectations. Nevertheless, the brokerage noted that the metal remains under pressure because the Federal Reserve continues to maintain a hawkish stance, which supports the US dollar.
Dr Renisha Chainani, Head of Research at Augmont, said gold has now fallen for four consecutive weeks and has declined nearly 30 per cent from its January 2026 international peak.
She noted that the Federal Reserve’s hawkish position, inflation remaining above target and expectations of multiple rate hikes continue to create significant challenges for non-yielding assets such as gold.
According to her, the recent US-Iran conflict briefly revived safe-haven demand, but the effect faded quickly as market attention shifted back to inflation and interest-rate expectations.
Gaurav Garg, Research Analyst at Lemonn Markets Desk, also linked the weakness in gold prices to easing geopolitical tensions.
He said that as concerns surrounding US-Iran tensions moderated, investors returned their focus to economic indicators that could influence future Federal Reserve decisions.
Key Factors Investors Are Watching
Market analysts believe the next major move in gold will depend largely on upcoming US economic data and the Federal Reserve’s policy direction.
Dr Chainani said particular attention should be paid to US non-farm payroll figures and ISM Manufacturing PMI data.
A noticeable slowdown in labour market conditions or weaker-than-expected inflation readings could ease pressure on gold and potentially support a recovery towards the $4,100–$4,150 range. Conversely, a strong employment report could push prices back towards the important $4,000 support level.
According to her analysis, COMEX gold currently has immediate support between $3,950 and $4,000. A break below that zone could lead to a further decline towards $3,600, while resistance is expected near $4,250.
Tim Waterer, Chief Market Analyst at KCM Trade, believes gold could eventually revisit the $5,000-per-ounce mark later in the year, provided oil prices retreat to pre-conflict levels, inflation concerns ease and the US dollar weakens.
What It Means for Buyers
For jewellery buyers, the correction of nearly Rs 50,000 from peak levels has provided some relief after an extended period of record-high prices.
However, analysts warn that gold is likely to remain volatile in the near term as markets react to developments in the Middle East, US economic data releases and Federal Reserve policy decisions.
While gold continues to serve as a long-term hedge against economic and geopolitical uncertainty, its short-term direction will depend largely on whether inflation slows sufficiently to allow the Federal Reserve to adopt a less restrictive stance or whether interest rates remain elevated for an extended period.
