However, the recent decline is widely seen by market experts as a much-needed breather and not the bursting of a bubble.
The earlier rally was driven by a confluence of global risk factors ranging from geopolitical tensions, US tariff uncertainties, a looming government shutdown and the weakening of the dollar.
In addition, declining inflation expectations, institutional profit booking and a temporary spike in US bond yields created a situation ripe for near-term price consolidation.
Analysts remain confident that the broader backdrop remains unchanged. Global uncertainties remain high, central banks have consistently added gold to their reserves and governments are struggling with historically high debt ratios.
According to Renisha Chainani, head of research at Augmont, the correction “looks more like a healthy correction than a bubble bursting.” She added that investments in gold should be viewed through the lens of long-term value addition, rather than panic-driven short-term forays, with the long-term averages for 2026 indicating a retest of Rs 1,30,000-Rs 1,35,000 once uncertainty subsides. Manoj Kumar Jain of Prithvifinmart Commodity Research dismissed the bubble story entirely, calling it an “overdue correction after a stellar rally and easing US-China trade tensions.”
Jain believes global investor interest remains intact, supported by central bank buying and a continued push for portfolio diversification. He predicts that gold prices will rise to Rs 1,38,000–1,50,000 in the domestic market and $4,890–5,000 per troy ounce by Diwali.
For the short term, he sees support at $3,870 or Rs 1,17,000, with a longer-term base near $3,550 or Rs 1,08,000.
Moreover, Jigar Trivedi, Senior Research Analyst – Currencies & Commodities at Reliance Securities, noted that despite the recent pullback, gold is still on track for a monthly gain and has risen almost 50% this year, helped by strong demand from central banks. He also flagged short-term risks, saying “the yellow metal could fall to levels around $3,800/oz within a month” if the US Federal Reserve delays further rate cuts in December.
Meanwhile, broader global signals also play a role. Gold prices recently fell to around $4,010/oz, marking a second straight weekly rout, driven by fading hopes of upcoming US rate cuts and temporary optimism around US-China trade talks.
A year-long truce on tariffs on critical minerals and resumed soybean purchases helped sentiment, although uncertainty remains over the sustainability of this deal.
Despite the short-term volatility, gold has still managed to post a strong monthly performance and continues to rise almost 50% this year, supported by robust demand from central banks.
According to the World Gold Council, central banks bought 220 tonnes of gold in the third quarter – a 28% increase on the previous quarter – with countries such as Kazakhstan leading the way and Brazil intervening for the first time in four years.
However, not all signals are unequivocally bullish. The Fed has kept the markets guessing about further rate cuts. As Fed Chairman Jerome Powell noted, a rate cut in December is “not assured,” keeping the dollar firm and in turn keeping gold prices relatively expensive for foreign buyers.
If the Fed refrains from easing in the absence of new economic data – mainly due to the US government shutdown – prices could even reach levels around $3,800/oz in the coming month.
From a tactical perspective, traders keep a close eye on short-term price ranges. Manoj Kumar Jain highlighted an intraday band of Rs 1,20,700 to Rs 121,700, with a two-week target near Rs 1,22,500.
All told, analysts suggest that while gold’s recent decline has raised eyebrows, the metal’s long-term story remains intact. Whether this marks a pause for the next move higher or a deeper correction depends on the evolving global macroeconomic and geopolitical landscape.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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