Gold has been a favourite asset for investment for a lot of Indians. They have a craze for the yellow metal so much that India is one of the top two consumers of the metal in the world. 

So when the price breached Rs 1 lakh for 10 grams of gold in India, everyone became anxious and a few even thought that people would be less interested in buying gold. 

But the Indian consumers kept consuming it and the price kept on rising and 24-karat gold is still trading over Rs 1 lakh per 10 grams in various cities across India, though the global price per ounce has fallen by nearly 30% from recent all-time highs. 

So let us take a look at the factors that are keeping the gold price high and is there a possibility for the price to fall. 

Gold’s Journey To Rs 1 Lakh Per 10 Grams 

The price of gold did not hit Rs 1 lakh per gram in a few days, but the price rose gradually but started to gain momentum after 2022 and it rose rapidly in 2024 and 2025. By the end of December 2025, gold was already priced at about  Rs 1,33,195 per 10 grams, and it later reached a high of around  Rs 1,56,709 per 10 grams in early February 2026.

In 2024, the price of gold was hovering at around Rs 77,000 – Rs 78,000 per 10 grams. This meant that Indian investors who have the habit of investing in gold saw their wealth increase quickly by multiple times in less than two years. By any measure, this was an unexpected rally and any unexpected event always brings up the question like how long they can last.

The Rs 1 lakh level is not just a round number but it is more of a psychological anchor. In markets, these psychological levels matter and many investors keenly watch these levels. 

Whenever a price of an asset crosses a psychological level, it gives an indication to them about the likely trend of the asset or security in the coming days or months. The media also covers these kinds of events because it attracts a lot of eye balls from consumers and also helps them in their TRPs. 

So, whether gold price per 10 grams stays above or falls below  Rs 1 lakh is an important news for a lot of people because it will influence how millions of Indian families view the yellow metal for many years to come.

Quick Recap Of The Causes For Gold Prices To Rise 

To assess whether gold can fall, it helps to understand what pushed it up in the first place. The rally was not driven by a single factor, it was a convergence of several powerful forces working simultaneously.

Geopolitical events played a big role for the gold prices to rise. War between Ukraine and Russia since 2022 and the recent tensions in the Middle East between Israel, Iran and the US led to panic among investors and they parked their money in safe-haven metal. Gold is an asset with zero counterparty risk and hence a lot of investors invested in the metal as they considered it as a hedge against global uncertainty. 

A weakening US Dollar in 2025 was the second major driver. When the dollar softens, gold which is priced in dollars becomes cheaper for buyers in other currencies, lifting global demand. A weaker dollar environment through 2025 was a significant structural tailwind.

Central bank buying provided the floor. Central banks from emerging countries like China, India, Turkey and Brazil have been aggressively diversifying their reserves away from dollar-denominated assets. Even countries like Poland, Uzbekistan and Global central bank gold demand averaged over 500 tonnes per year, providing a consistent and structural bid beneath prices.

A depreciating rupee amplified all of this for Indian investors. Since India imports nearly all of its gold, a weaker rupee means higher domestic gold prices even when international prices are stable. The USD/INR rate crossing  Rs 95 has been a significant multiplier in the Indian gold price equation.

The Bull Case: Why gold could stay above Rs 1 lakh

Let us be clear: the structural case for gold remaining above  Rs 1 lakh is compelling. Several forces are unlikely to reverse quickly.

Federal Reserve rate cuts remain on the table. Markets are currently pricing in multiple rate cuts through 2026. Lower rates reduce the opportunity cost of holding a non-yielding asset like gold. Every rate cut by the Fed is, in effect, a tailwind for gold globally.

Central banks are not slowing down. The trend of de-dollarisation among BRICS nations and other emerging markets is a generational shift, not a short-term trade. China, in particular, has been consistently adding gold to its reserves,  a structural demand driver that does not switch off because of short-term price levels.

BRICS-driven monetary diversification has added a new layer of demand that did not exist a decade ago. The development of alternative payment systems has accelerated gold’s role as a neutral reserve asset, and this trend is expected to intensify through 2026 and beyond.

J.P. Morgan’s base case for gold remains bullish, with analysts targeting $5,000 per ounce by the final quarter of 2026. At that price, with the USD/INR rate around current levels, Indian gold prices would be significantly higher than today.

Inflation above the Fed’s target is another supporting factor. Core CPI in the US remains stubbornly above 2%, sitting near 3.5%. When inflation outpaces Treasury yields, real interest rates stay negative,  historically the single most bullish condition for gold.

The Bear Case: Factors That Could Pull Gold Below Rs 1 Lakh

Here is where it gets uncomfortable because the risks are real and cannot be dismissed.

A hawkish Fed pivot would be the most damaging scenario. If US growth remains strong and inflation re-accelerates, the Fed could pause rate cuts or, in a more severe scenario, raise rates again. Some analysts also say that Fed’s determination to fight higher for longer inflation could trigger sustained Western ETF outflows, a persistent and serious headwind for gold.

Rising US bond yields are a direct competitor to gold. A sustained high yield on the 30-year US Treasury yield would likely dampen the interest of investors to park their money in gold. Historically, whenever bond yields have increased sharply, there has been a correction in gold prices even during broader bull markets. For example, aggressive rate hikes in 2022 by the US Fed weighed heavily on gold prices, even when war broke out between Russia and Ukraine. 

De-escalation of war tensions between countries can have an impact on gold prices. One of the important reasons for the prices of gold to rally, in recent times, can be linked to geopolitical risk premiums. If Middle East tensions ease or if US-China trade tensions are sorted out, a rapid unwinding of those risk premiums could cause a sharp pullback in prices.

ETF outflows have already begun to signal caution. Investors closing out positions and natural profit-taking following a historic rally can combine to create downward pressure, especially if the macro narrative shifts.

A stronger US Dollar remains the wild card. Gold and the dollar have a well-established inverse relationship. If the dollar strengthens — driven by a stronger-than-expected US economy — gold faces a double squeeze: lower international spot prices and a stronger conversion rate into rupees.

Indian Rupee and Gold Prices 

Most gold discussions in India focus entirely on international prices. But for Indian investors, the rupee-dollar exchange rate is equally important. 

India imports over 99% of its gold demand. Every tonne of imported gold is priced in dollars and paid for in rupees. This means the domestic gold price is a product of two moving parts: the international spot price of gold (XAUUSD) and the USD/INR exchange rate.

So, if the rupee appreciates against the US dollar and claws back to around Rs 82-83, the domestic gold price would fall substantially, even when the international prices are steady. Conversely, if the rupee weakens the domestic gold prices will rise and it may dampen consumption of gold. 

This is the unique dynamic Indian gold investors must always keep in mind: a ₹1 lakh floor is not determined solely by what happens on the COMEX in New York. It is a function of the global gold market and the foreign exchange market, simultaneously.

What History Tells Us About Sharp Gold Corrections

History always offers some lessons to those who are tracking gold prices. In 2012, gold prices in India increased to around ₹31,050 per 10 grams. Then the US Fed Chair Ben Bernanke in May 2013 hinted at tapering the Quantitative Easing programme. After that the gold fell sharply worldwide. Simultaneously, the RBI and the Indian government raised import duties from 4% to 10% between January 2013 and August 2013 so that the country could defend its current account deficit.

What followed was a painful multi-year consolidation. Between 2013 and 2018, domestic gold prices moved only sideways in the range of Rs 24,000 and Rs 31,000 per 10 grams. This period of nearly five years tested the patience of investors and early buyers saw zero or negative returns. Investors who bought at the 2012 peak had to wait until 2019-2020 to see any meaningful movement.

Could something similar happen now? A 20% correction from current levels would be enough to breach Rs 1 lakh per 10 grams. This is within the range of historical corrections that have occurred in gold markets. The 2013 episode was driven by a Fed policy shift and a stronger dollar. Those same two factors are, today, the most cited downside risks for gold in 2026.

The World Gold Council’s own analysis notes that if the Trump administration successfully accelerates economic growth and reduces geopolitical risk, higher rates and a stronger US dollar could push gold lower. This is a downside base case scenario from one of the most credible voices in the gold market.

Should You Buy, Hold, or Wait? 

If you are a long-term investor or have held gold for the long term, it is best to stay invested. Gold has been a safe-haven asset for centuries and it has always acted as a hedging tool. Even when gold prices have stayed stagnant during different periods, they have reached new highs every few years over a long-term perspective.  The underlying factors supporting gold, such as central bank purchases, gradual rupee depreciation and its role as an inflation hedge remain strong. 

For those considering a new investment, do not put a large amount of money all at once given current price levels. Instead, adopt a phased strategy or SIP kind of strategy to invest in smaller portions over the next few months. This will help you with rupee cost averaging and lowers the risk of entering the market near a peak.

As an investor, you must focus on allocation and not timing. Stay alert to macroeconomic indicators like US Federal Reserve’s FOMC meetings, US bond yields, US consumer price index (CPI) data, USD/INR exchange rate, strengthening or weakening of dollar index, any geopolitical events, etc. 

Gold as an investment asset should not be seen as a vehicle for quick profits. Its primary purpose in a portfolio is to protect against inflation, currency fluctuations and broader economic instability. For most Indian investors, allocating 10–15% of their portfolio to gold through physical gold, or Gold ETFs, etc. can be a sensible thing to do. 

Frequently Asked Questions (FAQs)

Will gold prices fall below Rs 1 lakh in 2026?

It is difficult to say if gold will fall below Rs 1 lakh given the circumstances. While not impossible, particularly, if the US Fed turns hawkish, bond yields rise sharply or geopolitical risks ease.

What is the biggest risk factor for gold prices right now?

The single biggest risk is a reversal in US Federal Reserve policy. If inflation accelerates, the Fed could be forced to pause or reverse rate cuts. Rising real yields and a stronger dollar would together create the most significant downside pressure on gold.

How does the rupee-dollar rate affect gold prices in India?

India imports nearly all its gold and pays in US dollars. A weaker rupee increases domestic gold prices even when international prices are flat. Conversely, a stronger rupee would reduce domestic prices. The USD-INR rate is as important as the XAU-USD price for Indian gold investors.

Should I buy gold now or wait for a correction?

For long-term investors, systematic investment through SIPs in Gold ETFs or staggered purchases is advisable rather than timing the market. Trying to time a 20% correction precisely is a high-risk strategy and it could cost investors.

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