Following one of its most powerful surges in recent history, the relentless climb of gold prices might see a temporary pause in 2026, according to a fresh analysis from ICICI Direct. However, the brokerage firm emphasises that the long-term trajectory for the precious metal remains decisively positive, anchored by deep-seated macroeconomic uncertainties.
What's Driving the Potential Pause in 2026?
The report, released on Tuesday, suggests that after an explosive rally where gold skyrocketed by over 60% in 2025 to touch unprecedented peaks, the market is ripe for a breather. This phenomenal run was fuelled by a confluence of factors: anticipated and actual interest rate cuts by the US Federal Reserve, aggressive accumulation by global central banks, persistent geopolitical conflicts, and growing worries about US fiscal health. This mix drove a massive flight to safety among investors worldwide.
ICICI Direct analysts point out that this sharp appreciation has left gold susceptible to short-term profit-taking by traders. A moderation in prices could materialise if there is a meaningful easing of geopolitical flashpoints, such as progress toward peace between Russia and Ukraine, or a stabilisation in US international trade policy. Such developments would reduce the 'risk premium' currently baked into gold's valuation.
The Unshakeable Bullish Pillars for Gold
Despite the prospect of a near-term consolidation, the structural case for holding gold is robust. The report highlights several enduring supportive factors:
First, the expected US Federal Reserve rate cuts in 2026 are a key pillar. Lower interest rates diminish the opportunity cost of holding non-yielding assets like gold, making it more attractive. Intriguingly, the analysis also cites ongoing concerns over rising global debt and questions regarding the long-term independence of the Fed as persistent tailwinds.
"Concerns over Fed independence will be supportive. There are fears in the market that the next Fed chair candidate would push for a lower interest rate," the ICICI Direct report noted.
Second, sustained central bank purchases provide a formidable floor for the market. Since 2022, these institutions have been net buyers, absorbing roughly 1,000 tonnes of gold annually. This trend has solidified gold's position as the world's second-largest reserve asset after the US dollar.
Price Targets: Strong Support and Ambitious Peaks
ICICI Direct has laid out clear price boundaries for the yellow metal. On the downside, the firm expects strong protection, with prices unlikely to fall below the $3,500 to $3,600 per ounce range even during a corrective phase.
Conversely, the upside potential remains significant. The report states that gold could test the $4,800 to $5,000 per ounce zone if macroeconomic risks intensify further or if the US dollar experiences pronounced weakness. Additional factors like lingering inflation worries, high government debt levels globally, and rising investment in Gold Exchange-Traded Funds (ETFs) are expected to continue buttressing prices.
In conclusion, while 2026 may witness gold catching its breath after a marathon sprint, its fundamental role as a premier hedge against uncertainty and a safe-haven asset is projected to stay rock-solid for the foreseeable future.
