Gold, long regarded as a safe-haven asset, has seen a sharp correction, falling over 10% since hitting an all-time high on October 20, 2025, when prices peaked at $4381 per ounce in the key London spot market. A similar trend has been observed in domestic markets, where MCX gold futures retreated from record highs near Rs 1,31,000 per 10 grams. This decline has prompted investors to reassess their positions and ask: Is this a buying opportunity or a time to book profits?
What Triggered the Correction?
The recent correction is a confluence of factors, including:
Profit Booking After a Historic Rally
Gold surged nearly 54% year-to-date until mid-October, driven by central bank buying, geopolitical tensions, and expectations of monetary easing. Once prices hit record levels, institutional investors and gold producers began profit-taking and hedging, triggering a wave of selling.
Ceasefire Between Israel and Hamas
The ceasefire agreement in Gaza reduced immediate geopolitical risk, dampening safe-haven demand. Historically, gold rallied during conflict, and peace deals often led to short-term price dips.
Muted Response to US Fed Rate Cut
Despite the Federal Reserve cutting rates by 25 basis points in late October, gold failed to rally. This was due to the Fed’s “hawkish cut” tone, with Chair Jerome Powell cautioning that further rate reductions are “far from certain.” This ambiguity strengthened the US dollar and Treasury yields, both of which pressured gold.
US Dollar and Treasury Yields
A surge in US Treasury yields and a recovery in the dollar have made gold less attractive. As yields rise, the opportunity cost of holding non-yielding assets like gold increases, leading to selling pressure.
Geopolitical Tensions Still Simmering
While the Middle East conflict has cooled, tensions between the US and Russia have escalated. President Putin’s revision of Russia’s nuclear doctrine has reignited concerns, but gold’s reaction has been subdued, suggesting that markets may be pricing in diplomatic containment rather than escalation.
Central Banks: Still Buying?
Despite the correction, central banks remain net buyers of gold. In Q3 2025, global central banks added 220 tonnes, a 28% increase from the previous quarter. Notably, Poland, India, and Uzbekistan were among the top buyers in November. This sustained accumulation reflects a strategic shift away from US dollar reserves and toward gold as a hedge against currency and geopolitical risks.
While gold is gaining prominence in central bank reserves, it’s premature to say it’s replacing the US dollar. However, the de-dollarisation trend is real. Countries like China, Russia, and India are diversifying their reserves, and gold’s stateless nature makes it an attractive alternative in a fragmented geopolitical landscape.
Domestic Demand: Post-Festival Trends
India’s gold demand saw mixed trends post-Dussehra and Diwali. While jewellery demand fell 16% year-on-year due to high prices, investment demand surged. Consumers shifted toward gold coins, bars, and ETFs, viewing gold more as a financial asset than a festive ornament. Leading jewellers reported record Diwali sales, but the momentum slowed afterwards, as prices corrected.
What Should Investors Do?
With gold correcting from its peak, investors face a dilemma: buy more or book profits?
Looking ahead, the short-term trend may remain range-bound or see further consolidation. The strength of the US dollar, Treasury yields, and Fed policy will be key drivers. If geopolitical tensions escalate again or the Fed signals dovishness, gold could rebound.
The structural drivers like central bank buying, inflation concerns, and geopolitical fragmentation remain intact and may be supportive for long-term investors. Gold continues to be a strategic asset for portfolio diversification and wealth preservation.
Investment Strategy
Those sitting on gains may consider partial profit booking, especially if gold forms a lower high in the coming weeks. However, long-term positions can be retained given the macro backdrop. Meanwhile, the current dip offers a potential entry point for new investors. SIPs in gold ETFs or sovereign gold bonds can help average out costs and reduce timing risk.
Also Read: Dividend darlings disappoint as 5 of top 10 PSU yield plays fall in double digits up to 28%
Gold’s recent correction is a healthy pause after an extraordinary rally. While short-term headwinds exist, the long-term case for gold remains strong. Investors should stay informed, avoid panic, and align their strategy with their financial goals.
(The author is Head of Commodity Research, Geojit Investments Limited)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
What Triggered the Correction?
The recent correction is a confluence of factors, including:
Gold surged nearly 54% year-to-date until mid-October, driven by central bank buying, geopolitical tensions, and expectations of monetary easing. Once prices hit record levels, institutional investors and gold producers began profit-taking and hedging, triggering a wave of selling.
The ceasefire agreement in Gaza reduced immediate geopolitical risk, dampening safe-haven demand. Historically, gold rallied during conflict, and peace deals often led to short-term price dips.
Despite the Federal Reserve cutting rates by 25 basis points in late October, gold failed to rally. This was due to the Fed’s “hawkish cut” tone, with Chair Jerome Powell cautioning that further rate reductions are “far from certain.” This ambiguity strengthened the US dollar and Treasury yields, both of which pressured gold.
A surge in US Treasury yields and a recovery in the dollar have made gold less attractive. As yields rise, the opportunity cost of holding non-yielding assets like gold increases, leading to selling pressure.
While the Middle East conflict has cooled, tensions between the US and Russia have escalated. President Putin’s revision of Russia’s nuclear doctrine has reignited concerns, but gold’s reaction has been subdued, suggesting that markets may be pricing in diplomatic containment rather than escalation.
Despite the correction, central banks remain net buyers of gold. In Q3 2025, global central banks added 220 tonnes, a 28% increase from the previous quarter. Notably, Poland, India, and Uzbekistan were among the top buyers in November. This sustained accumulation reflects a strategic shift away from US dollar reserves and toward gold as a hedge against currency and geopolitical risks.
While gold is gaining prominence in central bank reserves, it’s premature to say it’s replacing the US dollar. However, the de-dollarisation trend is real. Countries like China, Russia, and India are diversifying their reserves, and gold’s stateless nature makes it an attractive alternative in a fragmented geopolitical landscape.
Domestic Demand: Post-Festival Trends
India’s gold demand saw mixed trends post-Dussehra and Diwali. While jewellery demand fell 16% year-on-year due to high prices, investment demand surged. Consumers shifted toward gold coins, bars, and ETFs, viewing gold more as a financial asset than a festive ornament. Leading jewellers reported record Diwali sales, but the momentum slowed afterwards, as prices corrected.
What Should Investors Do?
With gold correcting from its peak, investors face a dilemma: buy more or book profits?
Looking ahead, the short-term trend may remain range-bound or see further consolidation. The strength of the US dollar, Treasury yields, and Fed policy will be key drivers. If geopolitical tensions escalate again or the Fed signals dovishness, gold could rebound.
The structural drivers like central bank buying, inflation concerns, and geopolitical fragmentation remain intact and may be supportive for long-term investors. Gold continues to be a strategic asset for portfolio diversification and wealth preservation.
Investment Strategy
Those sitting on gains may consider partial profit booking, especially if gold forms a lower high in the coming weeks. However, long-term positions can be retained given the macro backdrop. Meanwhile, the current dip offers a potential entry point for new investors. SIPs in gold ETFs or sovereign gold bonds can help average out costs and reduce timing risk.
Also Read: Dividend darlings disappoint as 5 of top 10 PSU yield plays fall in double digits up to 28%
Gold’s recent correction is a healthy pause after an extraordinary rally. While short-term headwinds exist, the long-term case for gold remains strong. Investors should stay informed, avoid panic, and align their strategy with their financial goals.
(The author is Head of Commodity Research, Geojit Investments Limited)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
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