According to Hitesh Jain, executive vice president at Yes Securities, gold's recent price weakness stems from higher real yields (US 10-year Treasury Inflation-Protected Securities or TIPS around 3%) and a shift in safe-haven preferences toward yielding or defensive alternatives like US Treasuries, the Swiss franc, and the Japanese yen. As reported by Mint, gold's safe-haven appeal is fading because the global economy is moving away from a 'savings glut' era to 'capital formation'. The US 10-year TIPS yield, around 3%, remains an important indicator to monitor, with real yields remaining elevated amid persistent inflation risks. MCX gold prices declined around 5% in October despite the US Federal Reserve's hawkish pause, a softer US dollar, and geopolitical tensions in West Asia, demonstrating the shift in investor preferences.
According to World Gold Council data highlighted in the interview, India's gold demand declined in the September quarter (Q3CY26) across jewellery and physical retail bars and coins. Jain does not expect import duty reductions any time soon, stating that while lower duties could support jewellery consumption, the government must also consider the current account deficit, foreign exchange requirements and the broader balance-of-payments position. Domestic gold demand faces several headwinds including elevated absolute prices affecting affordability, particularly among middle-income households, with jewellery consumers deferring purchases and opting for lighter jewellery or exchanging existing holdings instead of making fresh purchases. Elevated absolute gold prices, rising household commitments (education, housing, consumption) and attractive fixed-income/equity yields have dampened India's fetish for gold jewellery, further pressuring demand.
As reported by Mint, global central banks are diverging from retail trends, with their gold purchases accelerating sharply in Q3CY26 to their fastest pace since late 2024. This trend reflects a structural shift in global reserve management driven by geopolitical fragmentation, trade tensions and concerns over sovereign debt sustainability. Gold provides an alternative reserve asset that is not another country's liability and carries no direct sovereign credit exposure, with rising fiscal deficits reinforcing the case for reserve diversification. The US fiscal deficit, projected at $1.9 trillion or 5.8% of GDP in FY26, illustrates these concerns driving central-bank accumulation. Central-bank purchases provide structural support and, potentially, a valuation floor for gold during periods of market stress, though may not sustain another secular bull market if real interest rates remain elevated.
According to Jain's analysis reported by Mint, gold is transitioning from a strong structural bull market towards a prolonged consolidation phase, punctuated by tactical rallies driven by geopolitical developments, monetary policy shifts and central-bank purchases. Over the next three to five years, we expect gold to deliver relatively subdued returns and potentially underperform equities and industrial commodities. While gold will retain its strategic importance as a reserve asset and hedge against extreme geopolitical and financial uncertainty, the traditional role as the automatic first destination for safe-haven flows is becoming less pronounced. The preference remains tilted toward productive assets and selected industrial commodities including copper, aluminium, specialty steel and uranium. We would recommend a more selective buy-on-dips strategy rather than indiscriminate accumulation, as the global economy transitions from a savings glut to a capital formation regime where governments and corporations compete for capital to finance AI infrastructure, semiconductor manufacturing, defence, electrification and energy security.
