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Informist, Wednesday, Dec. 3, 2025

 

MUMBAI - Gold prices are likely to continue to rise next year after having attained new record highs in 2025, according to a note by Commerzbank Research. In October, gold prices had reached a record level of $4,398 per ounce on COMEX and INR 134,024 per 10 grams on MCX. In 2026, gold is seen reaching $4,400 per ounce on COMEX, it said in a release Tuesday.

 

Gold received considerable tailwind from strong safe haven demand due to numerous factors of uncertainty, said the note. This included the US president's tariff policy and his unprecedented attacks on the independence of the US Federal Reserve. "It is, therefore, not surprising that the US dollar's reputation as a safe haven suffered as a result, leading to stronger demand for gold," it said.

 

This is evident from the strong inflows into gold ETFs. According to data from the World Gold Council, these amounted to a good 670 tonnes in the first 10 months of the year. The last time ETF demand was stronger was five years ago in the wake of the coronavirus pandemic, it observed.

 

Granting that such an increase in gold prices cannot be repeated every year, Carsten Fritsch, the author of the note, said there are a number of reasons to expect a higher gold price next year.

 

"The most notable of these is the significant easing of monetary policy by the Fed that we expect to happen. US President Trump is likely to succeed in filling the Fed Board with a majority of people who share his vision of a significantly looser monetary policy over the course of the coming year."

 

It may begin with the appointment of a new Fed chair, as the term of the current chair, Jerome Powell, expires in May 2026, and he is also likely to then leave the board. Trump's economic advisor, Kevin Hassett, is considered the favourite to succeed Powell. He is regarded as a close ally of Trump and is likely to fulfil the US president's desire for lower interest rates. "We, therefore, expect the Fed to cut interest rates more sharply than markets anticipate over the course of the coming year," the note said.

 

Another reason cited by the author is the ongoing gold purchases by central banks. "Although these are unlikely to reach the very high levels of the previous three years in the year now drawing to a close, they are still likely to be significantly higher than before 2022. This is because many central banks still want to diversify their currency reserves."

 

Yet another consideration is the fact that Russian foreign exchange reserves held in Western currencies have been frozen since the start of the war in Ukraine and the EU is still considering making them available to Ukraine. "Central banks from countries that compete with the West will, therefore, consider in the future whether they can still faithfully invest their currency reserves in bonds from Western countries. With gold, on the other hand, there is no such risk of sanctions as long as the gold is stored in one's own country."

 

Nevertheless, the high price level is hurting physical demand, especially for gold jewellery. However, this is likely to be offset by continued robust investment demand. "We, therefore, expect the price of gold to rise to USD 4,400 per troy ounce over the course of the coming year. Price setbacks are possible in the meantime. However, as in recent months, these are likely to be short-lived," the note said.

 

At 1127 IST, the most active February gold futures contract on COMEX was trading 0.4% higher at $4,238.5 per ounce, whereas the same month contract on MCX was trading 0.7% higher at INR 130,660 per 10 grams.  End

 

US$1 = INR 90.25

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Abhijit Doshi

Edited by Deepshikha Bhardwaj

 

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