Gold drops over 26% from January peak as analysts see buying opportunity ahead of Diwali

Market analysts attribute the correction to rising US Treasury yields, a stronger US dollar, shifting geopolitical expectations, and rupee movements affecting domestic prices. Despite the downturn, structural drivers supporting gold remain intact, including continued central bank buying, fiscal concerns, geopolitical uncertainty, and reserve diversification trends.

Kaynat Chainwala, AVP of Commodity Research at Kotak Securities, noted that the decline offers a clearer view of evolving macroeconomic drivers. She said gold surrendered much of its January gains before a brief recovery toward $4,700 in late August, followed by another leg down ahead of the FOMC meeting as inflation data fueled expectations of near-certain Fed rate hikes.

Kaveri More, Commodity Technical Analyst at Choice Broking, described the current phase as consolidation and repricing rather than a signal for lump-sum buying. She advised investors to avoid trying to time the exact bottom and instead consider staggered purchases over the next few weeks in 3–4 tranches, particularly ahead of Diwali.

For festive or jewellery needs, buyers should purchase according to requirements. For investment purposes, More recommended Gold ETFs to avoid making charges and maintain flexibility. She cautioned that gold may remain volatile and could see further downside before stabilising, with support seen around $3,950 per ounce, urging sensible allocation and avoidance of deploying short-term expense funds.

Tata Mutual Fund, in its ‘Gold and Silver Outlook’ report, said current levels offer a significantly better entry point for those who missed the earlier rally compared to the start of the year. The fund reiterated that the medium-term outlook remains supported by central bank demand, fiscal risks, and geopolitical uncertainty, reinforcing gold’s role as a strategic asset despite near-term pressure.