ICICI Bank noted that gold prices have corrected nearly 15% since the onset of the West Asia conflict, reflecting the metal’s inverse relationship with the dollar.
Domestic gold prices in India have surged around 20% this year, supported by rupee weakness and customs duty hikes. At the same time, Gold ETF inflows have slowed significantly, indicating softer investment demand and mildly bearish sentiment. Despite these mixed signals, ICICI Bank Research expects domestic gold prices to trade between ₹1.5 lakh and ₹1.8 lakh per 10 grams through 2026, suggesting that the yellow metal may enter a phase of consolidation rather than a sharp correction.
According to ICICI Bank’s latest gold outlook report, several global and domestic factors are influencing the outlook for bullion. While near-term volatility remains elevated, the bank believes structural support for gold prices remains intact.
Gold has been one of the strongest-performing asset classes in recent years. The report noted that the metal delivered a rally of nearly 65% during 2025, while rising another 5% on a year-to-date basis in 2026. However, a large part of those gains came before geopolitical tensions escalated in West Asia.
Strong dollar
One of the biggest factors behind recent price weakness has been the movement of the US dollar.
ICICI Bank noted that gold prices have corrected nearly 15% since the onset of the West Asia conflict, reflecting the metal’s inverse relationship with the dollar. As geopolitical tensions intensified, the US dollar strengthened due to its safe-haven appeal and because the US economy appeared relatively better positioned than other major economic regions.
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As a result, investors reduced exposure to non-dollar assets, including gold, triggering a pullback in prices.
The impact has also appeared in demand indicators. According to World Gold Council data cited by the report, investment demand for gold declined 5% year-on-year in Q1 2026, driven largely by ETF outflows. Jewellery demand also weakened, falling 23%, though central bank purchases continued to remain resilient with nearly 2% growth.
ETF demand
The report highlighted signs that investor sentiment has moderated.
Gold ETF demand has softened as investors scaled back bullion exposure previously used as a hedge against dollar weakness. Holdings in SPDR Gold ETFs fell from 1,047 tonnes in April 2026 to 1,038 tonnes in May 2026, reflecting slower investment demand and mildly bearish positioning.
Domestic ETF trends also point to moderation. Average gold ETF inflows during March-April stood at ₹26.5 billion, significantly lower than ₹240.5 billion in January.
Support ahead
Despite softer near-term demand, ICICI Bank maintained a constructive medium-term view.
The report expects global gold prices to remain in a USD 4,400–4,600 per ounce range in the near term, while local prices may continue benefiting from rupee depreciation and the pass-through effect of higher customs duties.
The bank also highlighted longer-term structural drivers including central bank purchases, demand for safe-haven assets and ongoing concerns around the US dollar’s reserve currency status.
ICICI Bank expects global gold prices to move toward USD 4,800–5,000 per ounce by December 2026, which could support domestic prices and keep gold within the projected ₹1.5–1.8 lakh per 10 gram range through 2026.
Published on: May 27, 2026 8:10 AM IST
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