Golden Dip

De-dollarisation is keeping gold prices high despite the recent pull-back. The rates are expected to go through a time correction, say analysts

- By SALIL PANCHAL

JUST WHEN ECONOMISTS AND analysts were concerned over the dynamics of a sustained rise in international and domestic gold prices (see chart), there was a sharp pullback in the rally in October. This has caused experts to question whether gold prices will bounce back to record highs in 2026 and how de-dollarisation will play out in coming weeks.

Globally, in recent weeks, there have been changes to the structural demand for the dollar and its status as a reserve currency. It has also led to central banks diversifying from the dollar towards gold, where the share of the yellow metal in forex reserves of central banks has been rising. Institutions and individuals have also bought into the rally.

The share of gold in forex reserves in emerging market central banks has doubled to 9 percent, from 4 percent a decade ago, while the share of gold in developed markets is higher at 20 percent, according to a JP Morgan Global research note.

In the past week, gold prices have corrected by 8 to 12 percent. “We could see a time correction in gold over the next eight to 10 weeks, and prices are expected to move sideways,” says Anindya Banerjee, head of currency and commodity, Kotak Securities.

He adds that central banks globally are diversifying their forex into gold away from dollar. “Over the next four to five years, we expect the dollar to devalue further. This would be the perfect boost for gold and silver prices,” he explains. “Gold and silver could go back to record highs.”