Why Is Gold Price Increasing in India in 2026? New Global Factors Explained (January 2026)

Gold prices have been surging globally, and gold futures traded over ₹1,55,000 on the Multi-Commodity Exchange (MCX) as of January 23, 2026. Experts are attributing this surge to various factors, such as the US-Greenland tensions, global economic uncertainty, tensions in the Middle East and Europe, and rising central bank buying trends.

As a result, the price of gold in India has surged sharply, driven by these global market trends and a shift of investor sentiment. Read this blog to delve deeper into how each of these factors supports higher gold prices in India and know if this is the right time to invest in this safe-haven asset.

Why Gold Rate is Increasing

Gold prices in India are rising due to a combination of global and local factors. Here’s a complete breakdown of how each of these factors is contributing to the price of gold:

US - Greenland Dispute

Alongside ongoing global tensions, US President Trump’s recent push to buy Greenland has escalated US-Europe tensions. Greenland’s refusal to sell has led to President Trump threatening to annex or invade Greenland instead (breaking international law), with US acquisition being the end goal.

The stance remains uncompromising, with tariff threats emerging as a policy lever against resistance. This weakens the US dollar and boosts gold above $4,800 globally, lifting gold prices in India.

Global Economic Uncertainty and Geopolitical Tensions

Gold prices tend to rise whenever there is global economic uncertainty, as investor preferences shift from conventional markets to this safe-haven asset. Ongoing unrest in the Middle East, particularly surrounding Iran, and the prolonged Russia-Ukraine conflict continue to disrupt energy markets and global trade. These long-running tensions remain a key driver of investor caution.

Earlier in 2025, political changes in Japan also contributed to market volatility. The new leadership under Sanae Takaichi raised expectations of aggressive spending and easier monetary policy. This led to a weaker yen and lower bond yields, indirectly supporting gold demand.

Currency Fluctuations

The Federal Reserve rate cuts have already weakened the US dollar. While the expectation for the end-January meeting is to have steady rates, global markets still expect further cuts later in 2026.

A direct consequence of the weakening US dollar is a shift of investors toward the yellow metal. In addition, the Japanese Yen is also facing a downfall following last year’s shift in leadership. Such global currency fluctuations are also major contributors to rising gold rates.

Central Bank Policies

Central banks accumulate gold to diversify their holdings away from traditional currencies. These large-scale institutional purchases create significant demand in the global gold market, supporting higher prices.

As per reports, the People’s Bank of China (PBOC) has kept on adding reserves consecutively for 14 months as of January 2026. The figure of bullion held rose by 30,000 troy ounces in December 2025. On a smaller scale, the Reserve Bank of India has also kept on augmenting its gold reserves. As per reports, the RBI’s gold holdings stand at approximately $117.45 billion.

Strong Domestic Demand

India’s large population views gold as an essential part of celebrations and religious ceremonies, and as a traditional store of wealth. Whether during festival time or wedding season, there’s a natural rise in demand, which can increase the price in return. By the end of December 2025, gold prices had climbed further, trading at around ₹1.35 lakh per 10 grams across major Indian cities.

US Government Shutdown

The US government shutdown in October 2025 was one of the leading causes behind rising gold prices in India. Its aftermath included the complete suspension of non-essential services like visa processing and immigration processes, leading to tremendous global economic uncertainty. Essential services like border patrol were continued without any funding. The shutdown impacted gold prices, contributing to the push that drove them up.

Demand for a Hedge

The imposition of tariffs has increased trade tensions between the USA and India, and emphasised the relevance of gold as a safe-haven investment in times of economic crisis. A similar trend is also seen when inflation rises and erodes the purchasing power of traditional investments, though inflation is not currently a cause behind the rising rates.

Import-Related Expenses and Duties

India continues to depend heavily on gold imports, meeting its domestic demand through overseas purchases. This structural reliance remains unchanged in 2026, keeping domestic gold prices closely linked to global markets.

Import duties, customs charges, and logistics expenses add significant premiums to the base gold price. In early 2026, expectations of possible changes in import duties ahead of the Union Budget pushed local gold premiums to multi-year highs, directly impacting retail prices across India.

Also Read: Understanding the Impact of Gold Loan on Your CIBIL Score

Should You Buy Gold or Sell Now?

According to Chintan Haria, Principal Investment Strategist at ICICI Prudential AMC, investors should avoid chasing the recent surge in gold prices. He advises a gradual and disciplined allocation rather than trying to time the market, given the high volatility and possibility of short-term price corrections.

This approach suggests that while gold may continue to remain supported over the medium term, investors should balance potential gains with risk management, especially during periods of sharp price movement.

Effect of Gold Prices on the Indian Economy

The surge in gold prices has implications that affect both the Indian economy and personal finances. These are some of them:

• Current Account Deficit: India imports almost all its gold. So, a rise in the price of gold inflates the country’s import bill, which further widens the current account deficit.
• Shifting Savings Patterns: Indian families have considered gold as a safe store of value for generations. A surge in these gold prices may divert savings from other financial markets to more physical gold, limiting broader economic development.
• Boost to Gold Loan Market: Higher gold valuations mean individuals can access larger loans against the same quantity of gold. NBFCs experience increased demand for gold loans when prices are high, benefiting both lenders and borrowers seeking quick liquidity.
• Inflation and Retail Pricing: As gold is of essential value in Indian households, the cost of jewellery production and sale keeps rising. This further contributes to inflation in consumer goods, especially around festival and wedding seasons.

Also Read: How Raw Gold is Turned into Pure Gold: 5 Simple Steps

Why is Gold So Valuable?

Here are some reasons why gold is so valuable in India:

• Cultural Importance

For most Indian families, gold is not simply an investment; it carries value as a cherished asset and is considered a mark of a family’s social stature. It’s an integral part of Indian culture to give gold during weddings and festivals, and this drives the demand.

• Scarcity and Tangibility

Gold, unlike currency, cannot be produced at will. The extraction of gold is costly, which contributes to its rarity. Its physical nature and universal recognition as a store of value make it a trusted asset across countries and cultures.

• Liquidity and Collateral Value

Gold’s liquidity makes it easy to sell or pledge for a loan throughout India, making it both a secure and flexible asset. This is the reason why NBFCs provide gold-backed loans to serve diverse financial requirements.

• Safe Haven in Uncertainty

Gold is an asset that investors turn to during economic or political turmoil. Gold price rises or even tends to retain its value when conventional assets (like stocks) falter.

Also Read: How to Use a Gold Loan for a Medical Emergency: A Simple Guide

To Conclude

Gold prices in India have risen sharply due to a mix of global and domestic factors. Ongoing geopolitical tensions, central bank buying, currency movements, and global economic uncertainty continue to support higher prices. At the same time, strong domestic demand and import-related costs add further pressure on prices. A Gold Loan from Poonawalla Fincorp offers you up to 75% of the gold value, quick approval, and flexible repayment tenure.

FAQs

Why are gold prices rising in India?

Gold prices are rising due to a number of factors, including the US government shutdown, global economic uncertainty, and currency fluctuations among the top few factors.

How are central bank purchases influencing gold prices in 2026?

Central banks, especially in emerging markets, continue to add gold to their reserves. This steady institutional demand supports global gold prices and indirectly pushes up prices in India.

Does a weaker US dollar impact gold prices in India?

Yes. Gold is priced in US dollars globally. When the dollar weakens due to interest rate cuts or policy expectations, gold becomes more attractive, leading to higher prices worldwide, including in India.

Is gold expected to remain expensive through 2026?

Yes, according to data, strong central bank buying and sustained investor demand are expected to keep gold prices elevated through 2026, despite short-term volatility. The outlook suggests prices are more likely to stay high than see a prolonged decline during the year.

How does gold hedge against inflation?

When inflation occurs, it causes the erosion of an asset’s purchasing power. Gold, on the other hand, remains capable of either retaining its nominal value or gaining it. This is how it hedges against inflation.

Do changes in government policy affect gold prices?

Yes, higher import duty, GST changes, or import restrictions on gold will instantly drive up gold prices in India, irrespective of any international trends.

Does a surge in the gold price bring greater attraction to gold loans?

Yes, rising gold prices mean a higher loan amount can be obtained for the same gold jewellery, thereby making gold loans an attractive and logical option for funding.

Can festival demand drive gold price rise?

Yes, certain periods and festivals, such as Diwali or before peak wedding season, see huge demand and usually translate to a short-term hike in retail gold prices.