Owing to uncertainties on higher inflation and muted growth in the United States (US), coupled with concerns around America’s rising debt and tariffs imposed by President Donald Trump, the world’s largest economy has become the epicentre of an unabated record rally in prices of precious metals.
While prices of gold and silver have been going up in the past two years, the first six months (H1) this financial year (FY26) have seen strong gains.
In H1FY26, international gold has returned 22.1 per cent, the highest in any first half in at least 30 years.
Likewise, silver has returned 35.8 per cent, the best in three decades after the 66.3 per cent gain in the first half of 2020-21, when the pandemic came.
The returns are based on prices as on September 30, 5.40 pm.
In rupee terms, gold is up 29.5 per cent in H1FY26, again the highest first-half return in the past three decades, while silver gave 43.1 per cent, the best after the first half of the lockdown year’s 53 per cent gain.
On Tuesday, however, the gold and silver rally paused, with prices marginally correcting.
After reaching an all-time high of $3,871 an ounce in morning trade, gold prices corrected and the yellow metal was trading around $3,815.
Silver corrected from $47.1 an ounce and was trading around $46.3, a little away from its all-time high of $49 per ounce.
In Mumbai’s spot market, the 995-purity 24-carat gold closed at nearly Rs 1.15 lakh per 10 gm (down from the opening price of about Rs 1.16 lakh) while silver closed at more than Rs 1.42 lakh per kg (down from Rs 1.45 lakh in morning trade), in line with international prices.
The major reason for the recent rally in precious metals, especially gold, is the looming US government shutdown.
Its record debt of $37.5 trillion is difficult to finance, and the recent meeting between representatives of the Trump administration and the US Congress did not produce any result.
Shutdown fears in 1971 had led the Richard Nixon administration to suspend the dollar’s convertibility into gold.
For the past few months, the US Federal Reserve’s rate hike, looming inflation, the government’s comments against US Fed officials and geopolitical uncertainties in West Asia have boosted the rally in precious metals.
Globally, central banks have also been big buyers of gold.
The road ahead
Chirag Thakkar, director, Amrapali Gujarat, who has been recommending silver for a few months, said: “Silver now looks overbought and a correction is expected before the rally takes it to another new high.”
Thakkar, however, said high demand for silver from industry and investors had resulted in the market turning into a premium of 50 cents in India, while adding that ready delivery was difficult to get.
A leading trader said globally too electric-vehicle manufacturers were big buyers of silver, which is required for battery manufacturing, supported by demand from solar panel makers and investors.
While silver is in big demand, local demand for gold at present is weak.
Customers are buying coins and exchanging old jewellery for new.
Jewellers are worrying about Diwali demand.
But there is optimism. Rajesh Rokde, chairman, All India Gem and Jewellery Domestic Council, said: “As we approach Diwali, I expect demand to rise significantly, particularly for lightweight and investment-grade pieces or coins.
"We are projecting a 12–15 per cent growth in gold sales this year, which reflects both traditional buying and evolving consumer preferences.”
Jewellers are looking for non-traditional ways to market gold, Rokade said.
“This year we’re engaging Gen Z buyers through digital campaigns, influencer collaboration, and showcasing contemporary, eco-friendly designs.
"The response has been phenomenal, and we’re confident this edition will surpass expectations.”
T Gnansekar, cofounder, Commtrendz Research, a commodities risk advisory firm, said: “Gold prices may see resistance between $4,000 and $4,100 because it is difficult to avoid government shutdown in the US.”
He said “silver prices may test all-time high levels of $49 per ounce multiple times before it goes further high.
"Silver is projected to see a level of $60 per ounce.”
The first nine months' returns on gold and silver in international markets are the highest in 45 years.
The return in the first nine months of calendar year (CY) 2025 for gold is 45 per cent, while for silver it is 59 per cent.
In the first nine months of CY1979, in the international market, gold had returned 75.8 per cent while silver almost 170 per cent.
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