Gold prices in India have surged to around ₹1.07 lakh per 10 grams, raising questions about whether the rally can continue or if a correction is imminent. The Reserve Bank of India (RBI) has paused gold purchases since May 2025, reflecting caution at these elevated levels, according to recent reports from the Times of India.
RBI’s Calculated Pause
The RBI currently holds 880 metric tonnes of gold reserves, unchanged this fiscal year. Analysts believe the central bank is waiting for prices to soften before resuming purchases. A report in the Times of India said the pause reflects forecasts of short-term declines, with international prices near $3,445 per ounce.
Central banks globally have increased gold buying in recent years as a hedge against geopolitical risks and dollar volatility. However, purchasing at record levels could expose India’s reserves to price risk.
Short-Term Pressures on Gold
Predictions of a Correction
Some market observers expect a near-term pullback. Quant Mutual Fund recently forecast a 12–15 percent decline in gold prices in dollar terms over the next two months, though it maintained a positive outlook for the longer term.
Renisha Chainani, Head of Research at Augmont Gold, said prices could stabilize around ₹97,000 per 10 grams, with possible dips to ₹90,000, while still recommending gold as a long-term asset.
Support Levels and Investor Demand
Traders highlight strong technical support at ₹1,06,500, limiting the scope for sharp declines. Manav Modi, Senior Analyst at Motilal Oswal Financial Services, said, “We expect consolidation in the near term, but the broader trend remains positive.”
At the same time, jewellery demand in India has slumped. The World Gold Council (WGC) projects India’s consumption to fall to a five-year low in 2025 as high prices weigh on retail buying. However, investment demand—particularly through exchange-traded funds (ETFs) and sovereign gold bonds—has increased.
Global and Domestic Drivers
Influence of the Federal Reserve
Expectations of U.S. Federal Reserve rate cuts and a weakening dollar have supported the rally. Lower rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive to investors worldwide.
Geopolitical and Inflation Concerns
Gold remains a preferred hedge against inflation and political instability. Analysts note that ongoing global tensions, coupled with uncertain growth forecasts, continue to sustain demand from institutional investors and sovereign funds.
Outlook: Buy on Dips, Say Experts
The consensus among experts is cautious optimism. Prices may consolidate or correct slightly in the short run, but the medium-to-long-term trajectory remains upward. Several analysts, including those at Motilal Oswal and Augmont, recommend a buy-on-dips strategy.
Some forecasts suggest gold could touch ₹1.09–1.10 lakh per 10 grams within a year, while more bullish projections see potential highs of ₹1.20 lakh by the end of 2025, according to the Economic Times.
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Conclusion
Gold prices have reached unprecedented levels, creating a dilemma for policymakers and investors. The RBI’s pause reflects prudent risk management, while expert opinion suggests near-term caution but long-term strength. For Indian households and investors, systematic strategies such as ETFs or sovereign gold bonds may offer safer exposure than chasing prices at historic highs.
