Gold could resume its upward trend if geopolitical or economic conditions deteriorate, driven by potential macro shocks
New York: After a volatile start to the year, gold now faces a pivotal second half that will be shaped by unpredictability from geopolitics, rates, and investor sentiment, according to the Gold Mid-Year Outlook 2026 released by the World Gold Council. Gold set more than 12 all-time highs and reached a record US$5,405/oz in late January before pulling back sharply to a low of US$4,002/oz in June – a swing that resulted in a 7% year-to-date drop in price and an increase in average volatility to 30%. Despite the pullback, gold remains one of the strongest-performing assets over the past year.
Elevated geopolitical risk, driven in large part by the US-Iran conflict, was the most significant contributor to first-half performance, alongside momentum from investor positioning and profit-taking, according to the World Gold Council’s Gold Return Attribution Model (GRAM). Opportunity cost had a mixed effect as markets repriced rate and US dollar expectations. Notably, the bulk of gold’s price movement occurred during Asian and US trading sessions, reflecting the increasingly central role of Asian investors in global price discovery.
As investors look to the second half, gold will continue to serve as a barometer of global macro-economic conditions, as indicated by the World Gold Council’s Gold Valuation Framework. Unlike assets primarily driven by domestic dynamics, gold reflects demand from consumers, investors, and institutions worldwide. At current levels, the price is broadly consistent with consensus: at least one Fed rate hike in 2026, likely by October; parallel tightening from the Bank of England, Bank of Japan, and European Central Bank; and US inflation peaking near 3.9% in Q2. If these conditions hold, gold may trade within ±5% of approximately US$4,100/oz through year-end.
Gold could resume its upward trend if geopolitical or economic conditions deteriorate, or if rate expectations shift, though only a strong signal of global deceleration is likely to push gold above US$4,500/oz. On the downside, dollar strength, rate hikes above expectations, and risk-on sentiment are the primary headwinds; sustained trading below US$4,000/oz could trigger further selling, though a drop of more than 10% from current levels will likely bring organic demand from long-term buyers across multiple geographies, based on historical performance.
Juan Carlos Artigas, Regional CEO, Americas and Global Head of Research at the World Gold Council, commented, “The gold market has made something clear this year: it is a genuinely global asset. The gold price reflects macro-economic and geopolitical dynamics around the world, not just in the US, which is part of what makes it such a valuable lens for investors. Rates matter, and we expect them to be a key variable in the second half. But gold’s performance is not driven by a single factor. Gold has come under pressure near US$4,000/oz this year and previously rebounded, supported by organic demand from long-term buyers across multiple geographies. That structural demand from central banks, institutional investors, and consumers worldwide is what underpins gold’s resilience.”
THE OUTLOOK FOR INDIA
The report also highlights key points specifically related to India and its role in the global gold market. It acknowledges India as the world’s second largest gold market, with net demand averaging 800 tonnes per year (as of a 5-year average up to 2025). Unlike China, India must import all its gold, which regularly impacts its current account deficit. Among recent developments affecting India, the report lists the US-Iran conflict, that disrupted India’s oil supply and increased energy prices, putting pressure on India’s foreign exchange reserves and leading to the Indian government implementing a sharp increase in gold import duty from 6% to 15% to conserve foreign exchange (since early April 2026). The increase in import duty is expected to reduce Indian jewellery, bar, and coin demand by 50-60 tonnes (about 10% year-on-year).
The report suggests that the impact of the increased duty is already reflected in gold price. Further economic slowdown could reduce Indian gold demand even more, as lower incomes deter purchases. There is also a risk of increased defaults on collateralized gold loans, which could boost gold supply in the market. According to the document, India remains a key wildcard for the global gold market due to its size and the government’s ability to influence demand through policy. The document highlights that policy shifts in key markets like India can subtly influence gold’s path in the second half of 2026.
The World Gold Council is a membership organization that champions the role gold plays as a strategic asset, shaping the future of a responsible and accessible gold supply chain. With trusted research, analysis, commentary and insights, it drives industry progress, shaping policy and setting standards for a sustainable gold market.
Retail Jeweller India News
