Gold prices ahead of Dhanteras: Up 10% in a year, but is the worst of correction still ahead?

Gold, traditionally a safe haven during periods of uncertainty, has had a difficult run in 2026. After scaling record highs in January, the precious metal has shed more than 30% from its peak, slipping below $4,000 an ounce. Yet, a longer-term comparison tells a different story. Since last year's Dhanteras, gold has outperformed both the Nifty and the Sensex, delivering positive returns despite its recent correction.

According to the India Bullion and Jewellers Association (IBJA), gold was priced at Rs 1,30,874 per 10 grams on Dhanteras 2025, compared with around Rs 1,38,000 currently, marking an increase of 10%.

However, the sharp reversal from January's record high has brought the metal under renewed pressure on a year-to-date basis. With prices now below $4,000 internationally and nearing oversold territory, analysts caution the correction may not be over. A sustained recovery, they say, remains uncertain.


The latest pressure comes amid renewed tensions surrounding the Iran war, which have pushed crude oil prices higher, stoked inflation concerns and strengthened expectations of further US Federal Reserve rate hikes later this year. The Fed has raised interest rates for the first time in three years, and experts expect the tightening trend to continue in upcoming meetings.

Time to buy ahead of Dhanteras?

For Indian investors, the festive season may present an opportunity to build gold exposure gradually, rather than make large purchases at once, according to Ponmudi R, CEO of Enrich Money.

“Investors should avoid deploying their entire allocation at one price. A staggered buying approach is more sensible, particularly after such a volatile correction. Jewellery purchases should be based on personal requirements, while investment decisions should consider price, liquidity and the overall portfolio allocation,” he said.

Nirprendra Yadav, analyst at Bonanza, shared a similar view, advising investors against attempting to call the exact market bottom or committing their entire allocation in a single purchase. For those with a long-term investment horizon, staggered buying can help navigate volatility and reduce the risk of entering the market at an unfavourable price.

Consumers planning to purchase jewellery for Dhanteras or weddings can use the correction to meet their requirements. Financial investors, however, should first assess their existing gold exposure, investment horizon and risk tolerance before increasing their holdings.

Consolidation ahead?

Bank of America (BofA) expects gold to remain below $4,000 over the next three months, although it forecasts an average price of $4,000 an ounce in the fourth quarter. Its demand tracker indicates that purchases by key buyers have declined 16.6% year-on-year. Indian imports fell 77.8%, while Chinese imports rose 39.3%.

Jewellery demand has also come under pressure. World Gold Council data shows that jewellery demand declined 25% in the US, 15% in India and 28% in China during the second quarter.

Central bank activity could add to the headwinds, particularly after a period of strong buying earlier this year. In a note dated October 12, BofA highlighted the possibility of central banks turning net sellers amid escalating tensions in the Middle East. “With the Middle East conflict escalating again, there is a risk that central banks could resume sales,” BofA said, according to a Yahoo Finance report.

The bank cited Turkey's net gold sales of 82 tonnes and Russia's 56 tonnes through August, as reported by the World Gold Council, as examples of this trend.

Inflation and monetary policy are adding another layer of uncertainty. US consumer prices rose 3.7% year-on-year in September, above the forecast of 3.6%. Core inflation also came in higher than expected at 2.6%. The Federal Reserve raised interest rates to 3.75%-4% in September, with officials signalling one more hike this year.

BofA believes gold may find a bottom only after the Fed exits its tightening cycle. A pause in the dollar's rally and easing concerns over the Iran war could also provide support for a recovery. Renewed concerns about currency debasement, however, offer another potential source of support. Some traders are already viewing the bank's cautious outlook as a contrarian signal.

On the technical front, gold needs to defend support at $3,886 an ounce. A sustained break below this level could expose the metal to a much deeper correction. While gold is approaching oversold territory, experts cautioned that significant downside risks remain. Elevated energy prices are adding to inflationary pressures and prompting investors to reassess the outlook for US monetary policy.

The metal will need to establish a firm price floor as higher oil prices keep inflation risks elevated and expectations of further rate tightening weigh on gold, the report added.

Yellow glow fading?

While concerns over the near-term outlook persist, S Naren, CIO of ICICI Prudential Mutual Fund, has cautioned investors against chasing the precious metal. Speaking at the ET Wealth Expo, he said he does not expect gold to return to its earlier relative valuation levels.

Naren attributed this to a fundamental shift in the way central banks view their reserves. Following the impounding of Russia's oil and gold reserves, central banks began reassessing their dependence on currencies such as the US dollar. The episode raised concerns about holding reserves entirely in currencies and prompted greater interest in gold as an alternative reserve asset.

He believes this shift could continue to support gold until the underlying issue is resolved. In his view, this structural change means the metal may not experience the degree of mean reversion that investors might anticipate based on historical trends.

Will gold make a comeback in 2027?

Despite the near-term challenges, Standard Chartered remains positive on gold's longer-term prospects. The bank expects the metal to average $4,650 an ounce in the fourth quarter, before climbing to $4,850 in the first quarter of 2027.

This outlook comes even as expectations of further Federal Reserve tightening remain elevated.

BofA also expects gold to recover next year, forecasting prices of $4,750 an ounce in the first quarter of 2027, followed by a rise to $5,000 in the second and third quarters.

Goldman Sachs, another major US investment bank, shares a similar longer-term outlook. It lowered its end-2026 price target to $4,650 in September but retained its forecast of $5,400 for 2027.

The differing near-term and longer-term forecasts leave investors weighing two contrasting forces: the pressure from inflation and monetary tightening in the months ahead, and the structural demand for gold that could support prices over a longer horizon.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here