Gold Monthly for January 2026

Gold Market Review and Outlook: 2025–2026

Gold emerged as one of the defining investment stories of 2025, recording its strongest annual performance of the century. The metal delivered gains of over 70%, setting more than fifty all-time highs throughout the year. Gold first crossed the $3,000 per troy ounce mark toward the end of the first quarter and surged beyond $4,000 per troy ounce shortly thereafter. The increase from $3,000 to $4,000 was the fastest $1,000 rise in history, completed in just 205 days. After reaching a high of $4,381 in the second half of the year, gold experienced a pullback of approximately 11% before regaining momentum to close the year at a new record high of $4,536 per troy ounce. The rise of gold was mirrored in India, where the weakening rupee and higher global prices pushed domestic gold past ₹1,30,000 per 10 grams, delivering annual gains of more than 75%. Globally, commodity markets performed strongly, with white metals such as silver, platinum, and palladium also posting significant gains, benefitting from the rush to hard assets.

The performance of gold in 2025 was driven by a combination of macroeconomic, monetary, and geopolitical factors. In the United States, GDP growth averaged 1.6% in the first half of the year and accelerated to 4.3% annualized growth in the third quarter, reflecting some resilience. However, this growth was concentrated in high-income households and large corporations, while other segments of the population struggled. Labour market conditions weakened over the course of the year, with the unemployment rate rising from 4.1% in November 2024 to 4.4% in November 2025. Consumer sentiment deteriorated significantly, as reflected in the decline of the Consumer Confidence Index from 104.7 in November 2024 to 89.1 in December 2025. Weakness in the labour market, paradoxically, supported commodity and equity prices as it reinforced expectations that the Federal Reserve would maintain accommodative monetary policy, keeping bond yields from rising materially. Reducing real interest rates remained a key driver of gold’s appeal. After a period of low inflation readings early in the year, began a choppy upward trend from April 2025, signalling the early stages of a new inflation wave. While near-term inflation remained modest, rising price pressures amid slowing growth raised the possibility of a stagflation scenario, historically a bullish environment for gold.

Monetary policy played a critical role in supporting gold prices. The Federal Reserve implemented a cumulative 75-basis-point rate cut in 2025, following 100 basis points of reductions in 2024, after previously signalling a more cautious stance. In October 2025, the Fed ended quantitative tightening and began purchasing approximately $40 billion in short-term government securities, effectively injecting liquidity into the economy. While Chair Jerome Powell indicated that further rate reductions would be contingent on a significant weakening of the labour market, ongoing job weakness and potential downward revisions to employment, data suggest additional easing may be forthcoming. The Fed Funds Rate is expected to further reduce to 3%, as core year-over-year CPI and PCE growth remain near 3%, providing enough room for rate cuts to support weaker growth and thereby a supportive backdrop for gold prices.

Structural challenges in the United States also contributed to the bullish environment for gold. Public debt exceeded $38 trillion by late 2025, with the debt-to-GDP ratio reaching approximately 118.8%. The current account deficit surged to $439.8 billion in Q1 due to front-loaded imports ahead of tariff increase, narrowing to $251.3 billion in Q2 as imports declined, yet remaining structurally elevated. Rising interest costs have become a significant portion of federal expenditure, with net interest payments approaching $970 billion annually, surpassing U.S. defence spending of approximately $900 billion, a trend perceived as dilution of dominance. These dynamics, coupled with ongoing fiscal deficits, weakening labour market trends, monetary easing and uncertain policy making leading to increased trust deficit, weighing on the U.S. dollar, whose share of global foreign exchange reserves declined from 46.4% at the start of 2025 to 40% by year-end. U.S. Treasury yields fell from 4.5% at the beginning of the year to 4.1% in December, driven by expectations of Fed rate cuts and concerns about slowing growth.

Central bank and investor demand remained a key pillar of support for gold in 2025. Central banks continued to add gold to reserves, with annual purchases exceeding 600 tonnes by the end of the third quarter. Investment demand was equally robust, with global gold ETFs recording inflows of 712.6 tonnes or over $77.3 billion during the year. In India, total assets in gold investment products surpassed INR 1.5 trillion, driven by heightened retail participation. This combination of institutional and retail demand, along with structural central bank purchases, has reinforced gold’s role as a safe-haven asset. We expect the trend of diversification of reserves and investments in gold to continue in 2026.

In India, trade delays, tariffs, and RBI rate cuts contributed to a weakening rupee, amplifying gains in domestic gold prices. Looking ahead to 2026, gold enters the year at elevated levels but with strong fundamental support intact. Short-term volatility and intermittent corrections cannot be ruled out, yet the broader backdrop remains favourable. Monetary easing and liquidity support from the Federal Reserve, rising fiscal deficits, increasing debt burdens, geopolitical uncertainty, and continued central bank and investor demand all provide constructive conditions for gold. In this environment, gold continues to serve as an effective store of value and portfolio diversifier. A strategic allocation of approximately 15% remains appropriate for mitigating overall portfolio risk and enhancing long-term risk-adjusted returns. While short-term fluctuations may occur, gold’s structural drivers and safe-haven characteristics are expected to sustain its role as a core component of diversified investment portfolios in the years ahead.

Source: Bloomberg, World Gold Council

Above article is authored by Quantum.

View All