India is increasingly emerging not just as a major consumer of gold, but as a structural force capable of shaping its global performance in ways that extend well beyond the usual macro and geopolitical drivers.
With annual demand of roughly 800 tonnes, India is gold’s second-largest market. Its scale alone makes it pivotal, but the fact that this demand is almost entirely import-dependent turns domestic policy decisions into global price variables, according to the World Gold Council’s mid-year outlook.
“As the US-Iran conflict affected India’s oil supply and energy prices, the government was forced to intervene to conserve foreign exchange reserves amid mounting pressure on the INR. Since early April, it has adopted a series of measures aimed at moderating gold imports, including a sharp duty increase – from 6-15 per cent – and consumer-directed messaging aimed at curtailing gold purchases,” the report said.
A sharp hike in import duties and targeted efforts to curb consumption in India are not just local demand management tools, WGC highlighted. They effectively reprice a significant share of global physical demand, with estimates pointing to a 50–60 tonne reduction in jewellery, bar, and coin consumption.
Layered on top of this is a more complex feedback loop: tighter financial conditions could trigger higher gold loan defaults, potentially adding supply back into the system. Taken together, India is shifting from a passive price taker to an active determinant of gold’s marginal demand and, increasingly, its short-term price trajectory.
“We believe the impact from the increased duty should already be reflected in the gold price. But further economic deceleration could impact Indian gold demand through the well-established income effect, deterring Indian consumers and investors from taking advantage of pullbacks to enter the market.”
But unlike China, whose gold market appears to be responding as expected to current conditions, India needs to import all its gold – a factor that regularly weighs on its current account deficit.
Gold surged to record highs in January, crossing above US$5,500 per ounce before dipping below US$4,000 in late June. The precious metal is down roughly 7 per cent year-to-date, though WGC noted this modest decline masks a dramatic rollercoaster.
At present, the gold price is approximately 25 per cent below its record high.
“Building on last year’s positive price momentum, gold set 12 all-time highs, surpassing US$5,500 an ounce in late January amid heightened geopolitical risks and elevated options activity, before falling towards – and briefly dipping below – US$4,000 an ounce in late June.
“This sharp price swing pushed realised volatility to more than 50 per cent, alongside a broader rise in cross-asset volatility at the onset of the US-Iran conflict. Gold’s volatility has since come down below 30 per cent, although it remains above its 20-year average of 17 per cent.”
Gold’s performance in the first half of 2026 underscores its sensitivity to shifting macroeconomic conditions, geopolitical risk, and investor sentiment, while highlighting the growing influence of global and Asian demand.
Looking ahead, WGC expects gold to remain rangebound under current expectations but says it retains clear upside potential if risks intensify or policy expectations shift.
“Asia has been the engine of price support,” the outlook said.
“Interestingly, intraday analysis suggests that the bulk of gold’s movements have been linked to activity during Asian and US trading hours. Many of the pullbacks occurred during US hours and, conversely, gold’s rebounds generally occurred during Asian hours. This further highlights the increasingly relevant role that Asian investors (and consumers) play in price discovery and direction.”
Factors that could weigh on gold in 2026 include US dollar strength, rates rising beyond current expectations, investor risk-on sentiment, and technical pressures.
“Overall, our macro-based scenario analysis suggests that if gold were to decline by 10 per cent to 15 per cent from current levels, further downside would likely be limited as, historically, lower prices trigger buying from various sectors.”
Gold requires a clear catalyst to resume its upward trend, according to WGC – worsening economic or geopolitical conditions, a reversal in interest-rate expectations, or stronger long-term investor participation.
“In this context, our macro-based scenario analysis suggests that gold could resume its upward trend around US$4,500/oz, but only a strong, clear signal may push it sustainably towards US$5,000/oz.”
Meanwhile, India is not the only “wildcard” that could influence gold’s path in the second half of 2026, with enduring central bank demand and policy shifts also flagged. Central banks have been an important contributor to gold’s performance, having bought an average of 1,000t per year since 2022.
“In the first quarter of this year various central banks tactically sold (or swapped) gold. Despite this, initial estimates suggest that banks will continue to be consistent net buyers this year, but questions have been raised about the pace of their purchases,” the outlook said.
State Street Investment Management projects bullion prices can rally to US$4,750-US$5,500/oz over the next 6–9 months (70 per cent baseline), while bearish tactical headwinds have increased the odds, in their view, of the yellow metal hovering around US$4,000–US$4,750/oz (25 per cent scenario).
“We see robust price support at US$3,750-US$4,000/oz but view the odds of US$5,500-US$6,250/oz (5 per cent bull case) as less likely versus the January/February macro environment,” the firm said in its monthly report.
