Gold prices have reached unprecedented heights, defying expectations of corrections even after crossing the ₹1 lakh per 10gm milestone. The precious metal continues its remarkable ascent, with current prices approaching ₹1.45 lakh per 10gm and analysts speculating whether ₹1.5 lakh is within reach.

Spectacular Performance Numbers

The gold market has delivered extraordinary returns that have significantly outpaced equity markets. The performance data reveals the extent of this precious metal rally across different timeframes.

The data shows gold's consistent outperformance, with the metal delivering 20% returns compared to the Nifty's 8.7% gain. The momentum accelerated significantly, with prices rising approximately 70% from ₹78,000 to ₹1,33,000 during the period leading to mid-October, before experiencing a brief correction.

Key Drivers Behind Gold's Rally

Three primary factors contribute to gold's sustained upward trajectory, each playing a crucial role in maintaining investor interest and price momentum.

US Trade Policy Impact

Gold's traditional role as a safe-haven asset has been reinforced by uncertainties surrounding US trade policies. The implementation of tariff policies has created market uncertainty, driving investors toward gold as a hedge against potential economic disruption. Additionally, these policies have contributed to inflationary pressures in the US economy, though inflation levels remain relatively controlled.

The precious metal's historical effectiveness as an inflation hedge continues to attract investors concerned about potential economic impacts. Recession concerns for 2026, stemming from geopolitical and trade risks, further support gold's appeal during uncertain economic periods.

Geopolitical Tensions

Middle East developments continue to influence gold prices significantly. Despite peace agreements in certain regions, recent events in Yemen and Iran have maintained elevated tensions. The precious metal benefits from its reputation as a wealth preservation tool during political turmoil, with investors historically choosing physical gold over other assets during such periods.

The bullion market maintains close attention to Middle East developments, recognizing the region's potential impact on global financial markets and gold demand.

Speculation and Market Psychology

Speculative trading and fear of missing out (FOMO) contribute additional upward pressure on gold prices. Short-term traders engage in momentum-based buying, adding to the existing demand from fundamental factors. This speculative element creates additional price volatility and can amplify existing trends.

However, speculation represents an unreliable foundation for sustained price movements, as speculative interest can reverse quickly based on market sentiment changes.

Investment Strategy Considerations

Despite gold's impressive performance, investment experts recommend maintaining balanced portfolio allocation rather than dramatic asset reallocation. The recommended approach involves holding 5-10% of one's portfolio in gold consistently, rather than treating it as a substitute for other asset classes.

Investors should resist the temptation to sell equity positions to increase gold exposure, particularly when holding fundamentally strong stocks purchased at reasonable valuations. The strategy emphasizes maintaining equity investments as vital portfolio components while using gold as a diversification tool.

Market Outlook and Risk Factors

While gold's upward momentum remains strong in the short term, sustainability depends on the persistence of underlying driving factors. Changes in US trade policies, resolution of geopolitical tensions, or shifts in speculative sentiment could impact future price movements.

Investors should monitor developments in the three key areas driving gold prices: trade policy evolution, geopolitical stability, and market sentiment indicators. The current environment supports continued gold strength, but market conditions can change rapidly based on policy shifts or global developments.

The analysis suggests maintaining disciplined investment approaches rather than making dramatic portfolio changes based on recent price movements. Long-term wealth creation strategies benefit from diversified asset allocation, with gold serving as a portfolio stabilizer rather than a primary growth driver.

Silver futures on the Multi Commodity Exchange (MCX) reached a historic milestone, rising 5.5% to ₹3.03 lakh per kg, driven by international market gains amid escalating tariff tensions between the US and NATO allies over Greenland's sovereignty. However, the domestic physical silver market presents a contrasting picture, with significant discounts reflecting cooling demand in India.

Physical Market Shows Major Discount

The physical silver market in India is currently trading at a substantial discount to international prices. According to Surendra Mehta, national secretary of the India Bullion and Jewellers Association (IBJA), there is a ₹10,000 per kg discount prevailing in the physical market.

The IBJA's gold rates are officially used by the Reserve Bank of India (RBI) to redeem sovereign gold bonds, lending credibility to their market assessments.

Import Data Reflects Demand Trends

India's silver import and demand statistics through November 2025 highlight the market dynamics. Independent precious metals research consultancy Metals Focus reported that India imported 6,785 tonnes of silver against total demand of 7,040 tonnes during the same period.

Chirag Sheth, principal consultant (South Asia) at Metals Focus, confirmed the demand slowdown, stating that the historic price rally has resulted in reduced domestic appetite for the precious metal. Despite this near-term weakness, Sheth maintained a "bullish" outlook for silver, citing ongoing uncertainty around global tariffs.

ETF Surge Contrasts Physical Market

While physical demand has cooled, silver exchange-traded funds (ETFs) have witnessed remarkable growth. Domestic silver prices, as tracked by the Nippon India Silver ETF, rose 5.66% to ₹284.70 per gram, delivering impressive returns across different timeframes.

Satish Dondapati, fund manager at Kotak Mutual Fund, highlighted the dramatic shift in investor preferences. Silver ETF assets under management surged from ₹15,339.21 crore as of March 31, 2025, to ₹72,907.44 crore by end-December 2025.

Global Factors Drive Market Sentiment

The current silver rally stems from international developments, particularly tariff tensions affecting global trade dynamics. Market experts suggest that the "tariff wars" have created dislocations in silver markets worldwide. According to industry analysis, unless clarity emerges on trade policies, tightness in the metal supply is expected to continue globally, maintaining upbeat market sentiment.

The contrast between record-high futures prices and discounted physical market rates reflects the complex dynamics affecting India's silver market, where international price movements clash with local demand patterns.