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Gold Outlook – Time to cautious post sharp run up

ICICIdirect Research 19 Dec 2025 DISCLAIMER

Gold prices have run up 75% in the year 2025, by far the highest in any calendar year. In USD terms, it is up by 63%. So even currency tailwinds have been one of the highest for Indian gold prices. A thumb rule in investing is to be extra vigilant on anything which has run up too-far, too-fast. (Gold Return: 3-Yr is 33%, 5-Yr is 20%, 10-Yr is 16%, 15-Yr is 12%) 

Generally, 5 major factors which determine the gold prices trend are:  

Trump-tariffs related extreme hostile, and uncertain economic environment is likely to moderate as country specific trade deals getting finalised

Interest Rate-cut cycle: The rate cut cycle in U.S. is nearing its close with just one rate cut expected each in 2026 and 2027 (barring new U.S. Fed chair appointment which may increase the rate cut extent)

Inflationary Concern: U.S. inflation may start tapering off post 2026 as tariff induced base effect recede. 1-Year ahead U.S. consumer inflation expectations after shooting to 6% in May 2025 has come down to 4.1% and is likely to come down further.

Geo-Political Tensions: The world had never witnessed multiple global wars/conflict like Russia-Ukraine, Israel-Palestine, U.S.-Iran, in such a short span of time in last 2-3 years. Any peace progress particularly in Russia-Ukraine conflict may reduce the geo-political risk premium.

Buying by Global Central Banks: Central banks have bought record gold since 2022. More than 1050 tonnes every year as against less than 500 tonnes in previous years. Once it reduces (either due to higher prices or lower uncertainty), hot money banking on this demand may also disappear. 

All 5 major variables which drive gold prices are in extreme support zone and therefore incrementally as these variables starts receding, gold prices may take a breather. However, structurally, uncertainty has increased in the current world order due to anti-globalisation policies and trump being at the helm of the largest economy. Therefore, some allocation to gold in the range of 5-7% should always remain. 

Historically, Gold performs in spurts where it rallied significantly followed by long period of consolidation.

2002 to 2012: 6x from Rs 5000 to Rs 30000 per 10 grams
2012 to 2018: No return (Around Rs 30000) in INR terms but global prices fell by 45% from 2012-2015 (from USD 1900 to 1050). Rupee depreciated from 45 to 65 and the same prevented INR gold prices.
2019-2025: 4x (From Rs 30000 to Rs 130000). Apart from global prices, sharp INR depreciation has also led to higher prices. The pace of depreciation likely to reduce.

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