Prices of gold and silver continue to climb, with silver hitting fresh life highs this week, amid strong demand and economic uncertainties. Precious metals have been among the best performers across asset classes in 2025. Will 2026 be another strong year? This will depend on how the geopolitical tensions and the tariff-related issues pan out. Whether central banks continue to buy and whether exchange-traded funds continue to be in demand will also determine the trajectory of gold.
The US Federal Reserve slashed its key interest rate by 25 basis points, its third cut of the year. Typically, as interest rates fall, investors tend to get attracted towards safe-haven assets like gold. Silver, while also acting as a safe haven asset, also has multiple industrial use cases, especially in tech, and that also keeps its demand high.
Over the past year, due to geopolitical tensions and global trade and economic uncertainties amid a tariff war unleashed by the US Administration, investment demand for gold and silver has surged. Central banks around the world have also been net buyers, further supporting the yellow metal. Global gold prices have surged 60 per cent over the past 12 months. A weaker US dollar has also worked in its favour.
Value of silver, meanwhile, has doubled to more than $60 an ounce. The surge in value has attracted more investors.
Global gold exchange-traded funds (ETFs) have seen inflows six months in a row and are on track for their best-ever year. Total assets under management of global gold ETFs have touched $530 billion as of November end, and holdings at 3,932 tonne were also at their highest month-end value ever.
“The US Federal Reserve’s decision to cut key interest rates by 25 bps to 3.50-3.75 per cent amid persistent inflation has reinforced bullish sentiment in precious metals. Lower rates reduce the opportunity cost of holding non-yielding assets like gold and silver, attracting fresh investment flows. With bullion already at record highs, this policy shift adds momentum to the rally, as investors seek safe haven assets amid economic uncertainty and inflationary pressures,” said Hareesh V., head of commodity research at Geojit Investments.
Demand trends in India are mirroring those across the globe. Apart from strong investment demand, the rupee depreciation also adds to price pressure as India imports much of its gold. Gold imports into India hit a record $14.72 billion in October, aided by buying during the festive season and for weddings. Gold ETFs in India have also seen strong inflows. Between January and November 2025, Gold ETFs saw inflows of over Rs 31,300 crore, almost three times more than the inflows between January and November 2024.
The Pension Fund Regulator has also now allowed National Pension System (NPS), Unified Pension Scheme (UPS) and the Atal Pension Yojana to invest in silver and gold ETFs, and this could lead to further inflows into gold and silver funds.
In the domestic market, gold prices are hovering around Rs 1.32 lakh per 10 gram, up 65 per cent over 12 months. Silver price has touched Rs 2 lakh a kilo, more than double from a year ago.
Typically, precious metals like gold tend to grow through cycles. After an extremely strong 2025, prices should remain range-bound in 2026, according to the World Gold Council. However, if economic growth slows, and if central banks cut interest rates further, gold could yet deliver moderate returns, it said. In a severe downturn, gains could strengthen.
The Fed is expected to cut rates at least twice in 2026. All eyes will also be on how geopolitical tensions and the tariff uncertainties unfold next year.
While gold retains long-term support from persistent central banks’ purchases and safe-haven demand, 2026 may bring bouts of correction and volatility, said analysts at Axis Mutual Fund.
“As we enter 2026, many of the drivers that fuelled gold’s rally in 2025 may continue to provide support; however, investors need to be mindful of potential headwinds that may temper the momentum. Higher real yields, a stronger US dollar, higher global growth, reduced inflationary pressures and hawkish US policy stance may erode demand. Additionally, profit-taking, weaker ETF inflows, commodity rotation into industrial metals and easing geopolitical risks could also weigh on the prices,” they said.
Similarly, on silver, the Axis MF analysts point out that overvaluation leading to any weakness in physical demand, profit taking and potential outflows in ETFs, could put pressure on prices. Central banks’ continued preference for gold over silver may limit its official demand support, they further pointed out, adding that a possible substitution in industrial uses also poses a risk for the metal.
Neutral on silver, but gold?
Carsten Menke, head of next generation research at Julius Baer, says he is neutral on silver, while reiterating a constructive view on gold.
Julius Baer analysts point out that silver’s reaction to the recent Fed announcement was outsized, and since the resumption of the precious metals rally in November, silver’s outperformance to gold has risen to over 20 per cent. Considering a fairly similar fundamental backdrop for gold and silver, such a stark outperformance was not fully justified, and rather reflected the strong momentum of speculative traders and trend followers in the silver market, they said.
“While short-term risks are skewed to the upside because of the momentum in the market, we reiterate our view that prices have moved too far too fast, and we therefore remain neutral. At the same time, we reiterate our constructive view on gold, supported by the ongoing strength of investment demand and central bank buying,” Julius Baer said.
Some experts, though, remain bullish. Silver’s supply deficit isn’t easing anytime soon, and industrial demand continues to rise, pointed Nikunj Saraf, CEO, Choice Wealth. Gold also remains well-supported by structural buying and the geopolitical environment, he opined.
Still, he feels investors must temper their expectations after this year’s strong run.
“Staying invested with a long-term view, keeping allocations disciplined and booking partial profits if gains feel stretched is the most balanced approach,” according to Saraf.
