Gold defies tradition: Prices correct sharply, off 25% from peak

Gold appeared firmly on track for a strong start to 2026. In January, the precious metal scaled record highs, buoyed by expectations of stable inflation, the prospect of interest rate cuts by the US Federal Reserve and a relatively calm global economic environment. Investors increasingly leaned on gold as a preferred asset in uncertain times, viewing it as a reliable hedge against geopolitical risks and sharp currency movements.

That optimism, however, has faded over the past few weeks.

As tensions between the US–Israel bloc and Iran escalated into a wider conflict in West Asia, gold failed to live up to its traditional safe‑haven reputation. Instead of rallying, prices weakened after the conflict intensified, surprising many market participants who expected heightened geopolitical risks to drive renewed inflows into the metal.

Notably, Gold prices have witnessed a sharp correction from their record highs. Spot gold touched an all‑time high of $5,595.46 per ounce on January 29, but is currently trading around $4,633.57, marking a drop of nearly 17.2 per cent from the peak. The fall has been even more pronounced in the domestic market. MCX gold futures had hit an intraday record high of Rs 1,99,699 on January 29, compared with today’s low of Rs 1,49,733, translating into a steep decline of about 25 per cent from the lifetime high.