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Historically, gold has acted as a classic safe-haven asset, rallying during macroeconomic slowdowns. However, MCX gold prices declined around 5% in October despite the US Federal Reserve’s hawkish pause, a softer US dollar, and geopolitical tensions in West Asia.
Hitesh Jain, executive vice president at Yes Securities, in an interview with Mint said gold's recent price weakness stems from higher real yields (US 10-year Treasury Inflation-Protected Securities or TIPS around 3%) and a shift in safe-haven preferences toward yielding or defensive alternatives like US Treasuries, the Swiss franc, and the Japanese yen. Gold’s safe-haven appeal is fading because the global economy is moving away from a ‘savings glut’ era to ‘capital formation’.
While elevated absolute gold prices, rising household commitments (education, housing, consumption) and attractive fixed-income/equity yields have dampened India’s fetish for gold jewellery, Jain does not expect import duty reductions any time soon.
Overall, he sees gold transitioning from a secular bull market into a prolonged, cautious consolidation phase over the next three to five years, potentially underperforming equities and industrial commodities. Below are edited excerpts.
What specific market dynamics suppressed gold’s safe-haven appeal lately? Why did the traditional inverse relationship between equities and gold break down, leading to a simultaneous correction in both asset classes recently?
Gold's recent weakness reflects a shift in safe-haven preferences and rising opportunity costs. Despite the recent retreat in nominal bond yields, real yields remain elevated amid persistent inflation risks, limiting the attractiveness of non-yielding gold. The US 10-year TIPS yield, around 3%, remains an important indicator to monitor.
Meanwhile, safe-haven flows are being redirected towards US Treasuries, the Swiss franc and the Japanese yen, which offer either contractual income, currency stability or defensive characteristics. More importantly, the global economy is transitioning from a savings glut to a capital formation regime. Governments and corporations are competing for capital to finance AI infrastructure, semiconductor manufacturing, defence, electrification and energy security. This could sustain a structurally higher cost of capital, increasing the opportunity cost of holding gold. Consequently, equities and gold can correct simultaneously as investors reassess capital allocation rather than simply respond to geopolitical risks.
World Gold Council data highlights a decline in India’s gold demand in the September quarter (Q3CY26) across jewellery and physical retail bars and coins. Do you foresee an import duty reduction in the near-term? Which factors are currently constraining domestic retail investment demand?
We do not anticipate an immediate reduction in gold import duties in the absence of a clear policy signal. While lower duties could support jewellery consumption, the government must also consider the current account deficit, foreign exchange requirements and the broader balance-of-payments position. Domestic gold demand faces several headwinds. Elevated absolute prices have affected affordability, particularly among middle-income households, while jewellery consumers are deferring purchases, opting for lighter jewellery or exchanging existing holdings instead of making fresh purchases.
Rising household financial commitments towards consumption, education and housing are further constraining discretionary spending. Additionally, improving equity market opportunities and attractive fixed-income yields are increasing the opportunity cost of holding gold. Heightened price volatility following the extraordinary rally has also encouraged retail investors to postpone fresh purchases in anticipation of greater price stability or a deeper correction.
Global central banks are diverging from retail trends, with their gold purchases accelerating sharply in Q3CY26 to their fastest pace since late 2024. What does this signal about global financial stability, fiscal dominance, or de-dollarization trends?
Continued central-bank gold accumulation reflects a structural shift in global reserve management, driven by geopolitical fragmentation, trade tensions and concerns over sovereign debt sustainability. Gold provides an alternative reserve asset that is not another country's liability and carries no direct sovereign credit exposure. Rising fiscal deficits, government borrowing requirements and interest expenditure in major economies are reinforcing the case for reserve diversification. The US fiscal deficit, projected at $1.9 trillion or 5.8% of GDP in FY26, illustrates these concerns.
This trend indicates a gradual movement towards a more diversified international monetary system, rather than an imminent displacement of the US dollar. Importantly, central-bank purchases provide structural support and, potentially, a valuation floor for gold during periods of market stress, but may not sustain another secular bull market if real interest rates remain elevated. Reserve diversification is therefore evidence of declining concentration in dollar-denominated assets, not necessarily the collapse of dollar dominance.
What is the medium-term trajectory for gold? What are the upside and downside targets?
Our medium-term outlook remains relatively cautious. Gold is transitioning from a strong structural bull market towards a prolonged consolidation phase, punctuated by tactical rallies driven by geopolitical developments, monetary policy shifts and central-bank purchases.
Over the next three to five years, we expect gold to deliver relatively subdued returns and potentially underperform equities and industrial commodities. This is not necessarily a forecast of an outright price collapse; rather, our thesis centres on relative performance, with productive assets likely to offer superior returns during the emerging global investment cycle.
Will gold regain its status as the primary flight-to-safety asset? Does the 'buy on the dip' strategy still hold true for domestic gold investors?
Gold will retain its strategic importance as a reserve asset and hedge against extreme geopolitical and financial uncertainty. However, its traditional role as the automatic first destination for safe-haven flows is becoming less pronounced. We would recommend a more selective buy-on-dips strategy rather than indiscriminate accumulation.
Gold continues to offer portfolio diversification and protection against monetary instability, geopolitical shocks and declining confidence in sovereign currencies. However, investors should recognise the higher opportunity cost of holding a non-yielding asset and consider staggered accumulation rather than concentrated purchases.
Our preference over the next three to five years remains tilted towards productive assets and selected industrial commodities, including copper, aluminium, specialty steel and uranium, alongside capital goods, electrical equipment, defence, engineering and semiconductor manufacturing. Overall, gold remains relevant as a strategic portfolio hedge, but we increasingly view rallies as tactical opportunities rather than confirmation of a renewed secular bull market.
Harsha Jethmalani is a Deputy Editor at Mint with over a decade of experience covering stock markets and corporate India. As a key member of the Mark to Market team, she specializes in delivering cutting-edge commentary on market trends, the economy, and corporate financial reports.<br><br>Born and raised in Mumbai, Harsha’s entry into business journalism was a serendipitous pivot. Graduating during the 2008–2009 financial crisis, her initial goal of becoming a research analyst at an MNC was rerouted. However, what began as a chance career move quickly became a conscious choice; she discovered that financial journalism is a powerful storytelling tool capable of influencing and empowering the financial decisions of a massive audience.<br><br>Harsha began her career in 2009 at IRIS Business Services (Myiris.com), tracking mutual funds and interviewing fund managers. In 2011, she joined the Network18 Group, writing extensively on equity market trends for Moneycontrol.com and hosting pre- and post-market audio updates. Following a stint covering personal finance at Dalal Times, she joined Mint in 2016 as a Content Producer, steadily rising through the ranks to her current editorial position.<br><br>A defining highlight of her tenure at Mint was her extensive coverage of India's historic Goods and Services Tax (GST) reform. She chronicled the massive indirect tax overhaul from its initial conceptual and execution hurdles to its eventual streamlining. Her impactful reporting earned official recognition when her article exposing a spike in gold smuggling ahead of the GST rollout was formally acknowledged by the Office of the Director General of Audit (Central), Kolkata. Currently, Harsha closely tracks the IT, cement, real estate, and paint sectors. Her sharp news sense and ability to spot emerging trends consistently bring fresh, actionable perspectives to market analysis.<br><br>She holds a postgraduate degree in financial markets from Indira Gandhi National Open University and a Bachelor of Management Studies from Vivekanand Education Society, Chembur, Mumbai.
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