New Delhi: Gold prices in the domestic market could climb to Rs 1.60-1.68 lakh per 10 grams over the next 6-12 months, with price corrections offering buying opportunities amid sustained investment demand and central-bank purchases, according to a report.Motilal Oswal Financial Services Ltd (MOFSL), in its latest precious metals quarterly report, projected international gold prices to reach USD 4,500-4,700 per ounce in the medium term, while domestic prices could touch Rs 1.48 lakh per 10 grams in the short term.In its report titled ‘Gold’s Rally: Deferred, Not Derailed’, MOFSL said precious metals have witnessed volatility in 2026 following an exceptional rally in the previous year, amid changing expectations around US interest rates, persistent inflation, elevated bond yields and geopolitical developments.International gold prices surged to a record of nearly USD 5,600 per ounce in January 2026 before correcting below USD 4,000 and subsequently recovering.Silver also rallied beyond USD 100 per ounce before witnessing a sharper correction.Fluctuations in the rupee-dollar exchange rate further added to volatility in domestic bullion prices.Unlike the largely one-directional rally in 2025, precious metals have experienced sharper price swings this year, reflecting changing global macroeconomic conditions and monetary policy expectations, it added.In the domestic market, gold prices during Diwali have risen from around Rs 30,000 per 10 grams recorded in 2016 to nearly Rs 1.5 lakh in 2026, highlighting the significant appreciation over the past decade.Diwali and Dhanteras remain important occasions for precious-metal purchases, supported by traditional buying patterns, the wedding season and the cultural significance of gold and silver.However, historical trends indicate that festive demand has a stronger correlation with domestic premiums, imports and physical buying volumes than with international price movements.Historical performance also suggests that gold has generally delivered stronger returns during the 30 days preceding Diwali than in the subsequent 30 days.The trend was particularly pronounced in 2025, when gold gained nearly 20 per cent and silver around 38 per cent in the month leading up to the festival.Despite elevated prices, investment demand has remained relatively resilient. In India, gold ETF inflows increased 71 per cent month-on-month to Rs 4,450 crore in September 2026, while silver ETFs attracted inflows of Rs 1,970 crore.However, gold imports moderated to USD 1.8 billion in September from USD 2.3 billion in August, reflecting the impact of higher prices and measures to restrain bullion inflows.Globally, gold ETF holdings increased by about 187 tonnes during August and September 2026, taking total holdings to a record 4,256 tonnes, while third-quarter inflows reached a record USD 31 billion.”Gold continues to retain its importance as a defensive asset amid global economic and geopolitical uncertainties. However, its near-term trajectory will remain sensitive to the Federal Reserve’s monetary policy, inflation trends, movements in the US dollar and real bond yields,” said Navneet Damani, Head of Research of Commodities at MOFSL.He said the US Federal Reserve’s 25-basis-point rate hike in September, taking the policy rate to 3.75-4 per cent, had reinforced concerns around tighter monetary conditions.At the same time, central-bank diversification, sustained investment demand and fiscal uncertainties continue to provide structural support to gold.”In India, elevated prices have moderated discretionary jewellery demand, although wedding-related purchases and investment demand have remained relatively resilient,” Damani added.According to Manav Modi, Commodities Analyst at MOFSL, gold and silver were navigating a more complex market environment, with the interplay between safe-haven demand and macroeconomic headwinds driving heightened volatility.On the outlook, Damani said elevated US Treasury yields and a stronger dollar have weighed on prices, while underlying investment demand remains encouraging. Silver, on the other hand, offers greater upside potential but is accompanied by significantly higher price volatility, he said.”In the domestic market, assuming the rupee-dollar exchange rate at 96, we see Rs 1.35 lakh per 10 grams as a favourable accumulation zone, with a short-term target of Rs 1.48 lakh and a medium-term target of Rs 1.60-1.68 lakh range. Silver offers greater upside leverage, but investors should remain mindful of its significantly higher volatility,” he said.
