Gold and Silver Prices Expected to Remain Volatile in 2026 Amid Ongoing Market Uncertainty

India's Gold and Silver Prices to Remain Volatile Amid Elevated Oil Prices and US-Iran Tensions

India's gold and silver prices are likely to remain volatile in the near term, driven by elevated oil prices, which have pushed inflation expectations higher, keeping the dollar firm and raising the opportunity cost of holding non-yielding assets. According to Kaynat Chainwala, AVP - Commodity Research at Kotak Securities, the government's recent import restrictions and customs duties hike can slow dollar outflows, but the ability to meaningfully stabilise the rupee is limited, especially if global dollar strength persists or foreign capital inflows remain weak.

The government's import duty restriction on gold and silver can help slow dollar outflows in the near term, as higher duties and tighter controls usually cool import demand and reduce the immediate pressure on the current account. However, its ability to meaningfully stabilise the rupee is limited, especially if global dollar strength persists or foreign capital inflows remain weak. India's external balance remains far more sensitive to crude oil prices than to bullion imports, so gold and silver can amplify the pressure, but crude is still the main swing factor as energy imports remain the dominant driver of dollar outflows.

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The impact of the recent restrictions on retail behaviour should be visible fairly quickly, with higher local prices typically pushing buyers to delay purchases, buy lighter jewellery, or shift allocation toward ETFs or digital gold. However, this is demand deferred, not demand destroyed. India has experienced similar cycles before, with duties raised in 2012-13, increased again in 2022, and subsequently reduced in 2024. On each occasion, physical demand weakened temporarily before gradually recovering.

Gold and silver have remained highly volatile since the onset of the US-Iran war. While their behaviour in this cycle has been less straightforward, they are not structurally losing their shine as safe-haven assets. The war itself has created conditions that work against gold, with elevated oil prices pushing inflation expectations higher, keeping the dollar firm and raising the opportunity cost of holding non-yielding assets. Liquidity stress has also periodically forced sales of gold and silver for cash. However, global gold demand hit a record in Q1 2026, with bar and coin demand up 42% year-over-year.

The single biggest trigger for bullion that will set the definitive direction for the rest of the year is de-escalation, although the Federal Reserve will determine the extent of any sustained move. Continued conflict keeps energy prices elevated, reinforces inflationary pressures, limits the Fed's flexibility, and supports the US dollar. Markets are currently pricing in roughly a 40% probability of a rate hike before year-end, which continues to cap upside momentum in bullion while the Strait remains constrained.

Volatility is likely to remain elevated and potentially exceed levels markets have become accustomed to in recent years. The combination of an unresolved conflict, a contested Fed policy path, and India's duty shock has significantly reduced visibility across asset classes. Gold should prove the more stable of the two, supported by deeper liquidity and institutional ownership. Silver is the more erratic, as its additional sensitivity to industrial demand makes it responsive to global growth expectations on top of the monetary and geopolitical drivers. In this environment, risk management takes priority over conviction positioning.

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While both metals have already set records this year and pulled back sharply, fresh highs remain achievable, but sustained upside is unlikely while elevated energy prices continue to fuel inflation concerns and keep the Federal Reserve cautious. The stronger monetary tailwind required for another extended rally in bullion is unlikely to emerge until those pressures begin to ease.