The gold price seems to be breaking all records.
Even a few years ago, people would have been sceptical of the gold price sustaining comfortably above Rs 100,000 per 10 gm.
Many would have predicted a correction if the yellow metal hit 6 digits.
Not only has there not been a correction, but the price also looks set to go even higher… at least if the bulls have their way.
And the bulls are certainly in control right now.
Just look at the chart of the gold price….
Numbers Don’t Lie
Back in 2024, gold delivered 20% compared to the Nifty’s 8.7% gain.
And 2025 has seen the upward momentum continue.
From about Rs 78,000 to Rs 125,000, the price of gold, per 10 gm, has risen about 60% in a little over nine months this year.
In fact, since August 2024, the gold price has moved up from around 70,000 levels. That’s a rise of over 78% in a little over 14 months.
If we go back a little further, the price has been moving up sharply since February 2024 from 64,000 levels. That’s a gain of 95% in 20 months.
The gold price has doubled in a little under 2 years.
But about the future?
2026 Gold Price Outlook
Can gold continue to rise?
Yes, it can.
After all, the upward momentum in the price is very strong at the moment.
But could the price momentum sustain in 2026 and beyond?
All kinds of predictions and forecasts about the gold price have already been made by many so called ‘experts’. We will refrain from doing so in this editorial.
But we will say this: The future price of gold will depend on the sustainability of the underlying factors driving up the price now.
What are these factors?
Why Gold is Rising
#1 Fallout of US Trade Policies
Gold has always been a safe haven asset. People flock to gold either when times are tough or when there is uncertainty in financial markets.
Uncertainty has increased due to US President Donald Trump’s tariff policies.
The second and third order effects of these Trump’s tariff policies will only be known over time.
And this creates a degree of concern in financial markets.
There is also inflation to consider. Trump’s policies have had the effect of increasing the rate of inflation US, at least in the short term.
For now, inflation has not spiked too much in the US. But this will remain a concern as long as tariffs remain in place.
Gold has always been an effective hedge against inflation throughout history.
There are also concerns that the US economy could be heading in to a recession in 2026.
Gold typically does well when there is fear of a recession.
#2 Geopolitics
The Middle East is proving to be too hot to handle for financial markets. The last thing financial markets want is another war in this region.
The fallout of Israel’s attack on Qatar has only added to the concern.
Even in Ukraine, a ceasefire has failed to materialise.
Gold has always been seen as a means to preserve wealth in times of political turmoil.
During such times throughout history, people have chosen to hold on their wealth in physical gold instead of any other asset. This won’t change in the foreseeable future.
#3 Greed and Fear
And then there is good old speculation.
Sometimes, the price of an asset goes up because it’s going up.
Buy that we mean people buy because they think the price will go up due to the buying of others. They just want to tag along for the ride.
In financial language, this is called surfing the momentum. The ‘extra’ buying of these short term traders adds to the upward price momentum.
There is also FOMO (fear of missing out) at play here.
Fear can make asset prices move both ways. It causes people to sell when prices start going down but it can also cause people to buy.
This is due to traders feeling they are missing out on some easy, short term profits. The thinking goes, ‘If others are making easy money, why shouldn’t I?’
If you are tempted to buy gold now, you should be aware that speculation is unreliable. You can’t depend on speculators taking up the price, so that you can ride along and make easy profits.
That’s not how financial markets work. If that were possible, then every trader would be rich. That is not the case.
Conclusion
While the short term momentum is strong in gold, investors and traders should not get carried away.
When the entire market is talking about a rising price of gold, it’s easy to forget that the opposite can also happen.
As things stand, the bulls have the upper hand… but investors should carefully watch out for any potential changes to the underlying factors driving up gold. If the changes are sufficient in their significance, then the price of gold will fall.
At Equitymaster, we believe in having 5-10% of one’s portfolio in gold at all times.
However, investors should not see gold as a potential substitute for any other asset.
It makes sense to hold some precious metals in one’s long-term portfolio, but it does not make sense to speculate on short term price movements.
While considering an investment in gold, have a time horizon well beyond 2025 or 2026.
Just because prices have gone up recently, doesn’t automatically make gold a great investment.
Do your due diligence.
Happy investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here…
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