AFTER A STELLAR PERFORMANCE IN 2025, WHAT NEXT FOR GOLD?

–By Shri V P Nandakumar (Chairman and Managing Director, Manappuram Finance Ltd)

Gold had a blockbuster year in 2025, delivering returns in the range of 70–75% in rupee terms and setting multiple all‑time highs in both international and domestic markets. The rise in price far outpaced what most analysts had pencilled in a year earlier. As investors look ahead to 2026, the balance of strong safe‑haven demand, central‑bank buying and a broadly bullish commodities backdrop suggests further gains are likely, albeit at a more moderate pace than in 2025.

2025: A Year That Surprised Everyone

Most analysts entered 2025 expecting a good year for gold, but few anticipated the scale of the rally that eventually unfolded. Forecasts published in late 2024 typically clustered between 2,300 and 2,700 dollars an ounce for 2025, with even bullish scenarios stopping short of the levels ultimately reached. After all, gold went on to surge past 4,000 dollars an ounce at its October peak, with domestic prices in India approaching `1.4 lakh per 10 grams as the year drew to a close.

For Indian investors, this translated into calendar‑year returns of roughly 70–75%, making gold one of the best‑performing mainstream asset classes of 2025. The magnitude of the move was such that even long‑time gold bulls were forced to revise up their targets as the year progressed.

Why the Meteoric Rise

Two structural forces were central to gold’s stellar performance: sustained central‑bank accumulation and easy global liquidity conditions, particularly in the United States. A recent analysis of official‑sector activity shows that annual central‑bank net purchases averaged about 473 tonnes between 2010 and 2021, then jumped to 1,136 tonnes in 2022, 1,051 tonnes in 2023 and 1,045 tonnes in 2024, with 2025 recording 950 tonnes of purchases. This extraordinary appetite reflects a desire among many reserve managers to diversify away from the US dollar at a time of heightened geopolitical risk and concerns about the long‑term sustainability of developed‑market fiscal positions.

India’s own central bank has been an active participant in this trend. The Reserve Bank of India’s gold reserves rose to about 880 tonnes by the third quarter of 2025, up significantly from earlier years, and a larger proportion of these holdings is now kept domestically rather than overseas. These additions underscore gold’s growing role in India’s external balance‑sheet resilience and send a powerful signal to domestic investors about the metal’s strategic importance.

On the macro side, persistently loose fiscal and monetary policy in the United States has been a powerful tailwind. Large fiscal deficits, rising public debt and a stop‑start approach to tightening have kept real interest rates contained and revived fears of long‑term dollar debasement. With markets increasingly pricing in further rate cuts into 2026, non‑yielding assets such as gold have benefited from a lower opportunity cost of carry.

The Broader Commodities Boom

Gold’s outperformance in 2025 did not occur in isolation; it was part of a broader upswing across the commodities complex. Silver, the traditional high‑beta counterpart to gold, almost tripled in domestic terms, with some estimates placing its annual gain at around 150–170%, supported by both safe‑haven flows and surging industrial demand from sectors such as electronics, solar and electric vehicles.

Base metals also joined the party. Copper prices on Indian exchanges delivered returns of more than 60% in 2025, while aluminium and other industrial metals posted strong double‑digit gains on the back of tightening supply, energy‑transition investment and restocking in key manufacturing hubs. This synchronous rally across precious and base metals suggests that investors were not only seeking safety, but also positioning for a new capex cycle and a world increasingly constrained by resource bottlenecks.

2026 Outlook: Tailwinds, Headwinds, and Forecasts

Looking ahead, consensus projections still point to upside for gold, but from a much higher base and with greater dispersion in views. Major investment banks now see gold averaging somewhere in the mid‑4,000s per ounce in 2026, with some calling for targets as high as 4,900–5,000 dollars under benign conditions that do not assume a full‑blown crisis.

On the tailwind side, three factors stand out:

• Ongoing central‑bank demand, particularly from emerging markets seeking to diversify reserves.

• Expectations of further monetary easing in advanced economies, which would keep real yields low and support non‑yielding assets.

• Elevated geopolitical tensions and “fragmentation risk”, which sustain safe‑haven flows into gold and other real assets.


• Set against these are some potential headwinds. A sharper‑than‑expected slowdown in global growth could dampen jewellery and industrial demand, especially in Asia. A strong rebound in the US dollar, perhaps triggered by a more hawkish Federal Reserve path, could also cap dollar‑denominated gold prices even if local‑currency prices remain firm in emerging markets. Finally, after the extraordinary gains of 2025, there is always the risk of intermittent profit‑taking as leveraged players rebalance portfolios.

Taken together, these forces argue for a more measured performance in 2026: gold is unlikely to repeat the fireworks of the previous year, but the fundamental backdrop still appears supportive of an upward drift rather than a reversal. The fact that silver, copper and aluminium have all outpaced gold in percentage‑return terms reinforces the view that a broader commodities cycle is under way, with gold acting as both anchor and barometer of investor sentiment.

Where Might Gold Be by End‑2026?

Forecasting precise price levels is always hazardous, more so after a year as exceptional as 2025. Nonetheless, looking at the prevailing central‑bank buying patterns, projected interest‑rate cuts and the continued churn in global geopolitics, it is reasonable to expect gold to finish 2026 modestly higher than current levels rather than meaningfully lower. Many institutional forecasts cluster around a further 10–15% upside over a two‑year horizon, implying that by December 2026, international prices could be broadly in line with the 4,500–4,900‑dollar‑per‑ounce range, with domestic prices in India adjusting accordingly based on currency movements and local demand.

A December 2025 commodities outlook note from Goldman Sachs forecasts gold at 4,900 dollars per ounce by the end of 2026, supported by strong central‑bank demand and expected US Federal Reserve rate cuts. JP Morgan’s late‑2025 outlook calls for gold to average about 5,055 dollars per ounce in the fourth quarter of 2026, one of the more optimistic projections among major banks. The bank cites persistent central‑bank purchases (around 566 tonnes per quarter) and a Fed easing cycle, alongside worries about stagflation and currency debasement, as key supports for this higher path.

For investors and policy‑makers alike, the key message is that gold’s role as a strategic hedge has been reaffirmed, not diminished, by its recent outperformance. Central‑bank purchases, including those of the Reserve Bank of India, underline the metal’s importance as a reserve asset, while households have been reminded once again of its ability to protect real wealth in an era of loose monetary and fiscal policies aggravated by geopolitical flux. The most prudent base case, therefore, is for a continued, moderate appreciation in gold over 2026, with volatility along the way but with its safe‑haven status firmly intact.

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