Warren Buffet famously rejects gold as an investment arguing that “it doesn’t generate any services or goods or cashflows. It just sits there & looks at you”. Luckily, most Indians trust their civilizational instinct and don’t pay much heed to what Warren or other Western Bankers have to say. Below is how the economic status of an Indian family owning 1kg of gold could have changed over the past fifty years:
| Year | Value (1kg) | What can you buy |
|---|---|---|
| 1980 | 1.3lac | 2 cars (Ambassadors) |
| 1990 | 3.2lac | 3 cars (Maruti 800) |
| 2000 | 4.4lac | 1.2 cars (Hyundai Santro) |
| 2010 | 18lac | 1 car (Toyota Fortuner) |
| 2020 | 48lac | 1 car (Mercedes GLA) |
| 2026 | 155lac | 1 car (Mercedes S Class) |
Source: GreenEdge internal research
After a dream run in 2025, gold has recently entered a corrective phase. At the same time, geopolitics & economics have gotten murkier. We thought that this backdrop is an ideal set-up to re-visit our bullish thesis on gold (see our 2023 report).
Section 1 – The bumpy ride of 2026
Gold has been on a roller coaster ride this year – from all-time high of $5500 in January 2026 to lows of $4000 in June 2026 to $4300 currently. The macro back-drop has been equally volatile – the US-Iran war has started & stopped for 15th time; crude oil has crossed $100 twice; and the US Fed remains hawkish in its speeches but dovish in its actions.
| Date | Gold price | Comments |
|---|---|---|
| Jan-Feb'26 | $5300 | Euphoric rally, huge ETF buying in gold |
| Mar'26 | $4400 | US-Iran war, Crude above $100 |
| Apr'26 | $4800 | US-Iran negotiations start, Crude cools-off |
| Jun'26 | $4000 | War continues, Hawkish Fed |
| Aug'26 | $4600 | Chickenish Fed -- Bond buyback, Yen intervention |
| Sep'26 | $4300 | Crude above $100, Hawkish Fed, Rising bond yields |
Source: GreenEdge internal research
If one wears a short-term lens, it may seem that gold has lost its strength, since it is unable to reclaim its recent highs despite war & geopolitical tensions (not acting like safe haven). However, one must note that even gold corrected 29% when global financial crisis (2008) was unfolding and 12% when pandemic was spreading. In both the cases, there was a strong subsequent rally in gold.
If one wears a long-term lens, it seems this is more of a consolidation phase – a price correction of 15-20% after a rally 60-70% is not just normal but also very healthy. That gold is holding above $4000 despite the tough talk by US Fed and the global economic turmoil inflicted by high energy costs & supply chain disruptions, is also a sign of strength.
Section 2 – The smooth ride before the bumpy ride (2020 to 2025)
With the benefit of hindsight, one can say that the bull market in gold started during the pandemic, gained further impetus when US decided to freeze Russia’s forex reserves in 2022, accelerated in 2025 when investor demand for gold increased, and paused since the US-Iran war. Let us re-visit the demand-supply dynamics for gold to understand what has happened over the past few years and what are the future possibilities:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|---|---|---|
| Avg price ($) | $1268 | $1392 | $1800 | $1800 | $1800 | $1940 | $2350 | $3433 |
| Demand (tons) | 4,114 | 4,017 | 3,356 | 3,613 | 4,391 | 4,151 | 4,305 | 4,677 |
| Central Banks | 656 | 605 | 255 | 463 | 1,082 | 1,037 | 1,093 | 864 |
| Coins & Bars | 1,090 | 867 | 900 | 1,191 | 1,223 | 1,190 | 1,188 | 1,374 |
| Jewellery | 2,285 | 2,138 | 1,327 | 2,148 | 2,195 | 2,168 | 2,027 | 1,638 |
| ETFs | 83 | 408 | 874 | -189 | -109 | -244 | -3 | 801 |
| Supply (tons) | 3,641 | 3,605 | 3,421 | 3,546 | 3,612 | 3,661 | 3,597 | 3,598 |
Source: World Gold Council
Supply of gold: From the above table, it is easy to see that primary supply of gold (mining) has remained static at ~3600 tons per annum despite the three-fold increase in prices. This is because of structural constraints in gold mining:
- No major gold discoveries in the past 20 years
- Falling grades of ore (1 ton ore is yielding only 3gm of gold)
- Falling investment in discovery & development of new mines
It may be worthwhile to note that if all the gold in the world is combined together, it can easily fit inside Somnath temple (or a cube of 22 meters * 22 meters * 22 meters). Thus, it is easy to conclude that the swing factor in gold generally comes from the demand side.
Demand for gold: There are four major demand centers for gold i.e. Central Banks, Coins & Bars, Jewellery, and financial investor (ETF). Generally speaking, the demand for Coins & Bars and Jewellery is steady demand. It remains steady in periods of steady gold price; reduces when there is a sharp rally in gold price; and it increases when there is good correction in gold prices. It is generally the demand from Central Banks & Financial investors that is the swing factor! Let us take a deeper look at these two demand centers:
A) Demand from Central Banks: Every central bank is responsible for maintaining the country’s forex reserves, which typically consist of US$, gold, and basket of other currencies. Since US$ is the world’s reserve currency, most central banks have a large portion of their forex holding in US$. While China has been reducing the proportion of its US$ & increasing the proportion of gold since 2015, many other central banks have joined this bandwagon from 2022 (US freezing of Russian forex reserves).
| Parameter | Qty |
|---|---|
| Avg annual gold buying (2012-21) | 480 tons |
| Avg annual gold buying (2022-25) | 1019 tons |
| Gold as % of total forex reserves (2022) | 15% |
| Gold as % of total forex reserves (2025) | 25% |
Source: World Gold Council, IGWT report
In our 2023 article on gold, it was a hypothesis that trust in US$ has started declining and that central banks will continue to reduce their dollar reserves and increase their gold reserves. As we sit in 2026, we not only have data, but also have public announcements by central banks on the same:
According to the Central Bank Gold Reserves Survey 2025 (published in June 2025), a record 95% of central banks expected their global gold reserves to increase over the next 12 months. Notably, 2025 was the first year in the survey’s history in which zero respondents expected gold reserves to decline.
The Poland central bank has been aggressively buying gold since 2023 and has announced its plans to raise its gold reserves to 700 tons. According to the president of the National Bank of Poland (NBP), Adam Glapiński, “a country that borders a war zone is subject to special scrutiny, and hence, should own impeccable forex reserves”.
While it is anyone’s guess if the central banks will continue to buy 1000 tons annually, it is clear that most non-western banks have been diversifying away from US$. Also, many of them are trying to bring back the countries gold which is stored in the Western vaults. They are clearly seeing a multi-polar world ahead, where owning gold is of paramount importance.
B) Demand from Financial Investors: Investing in gold is typically done via purchasing bars & coins or via the ETF route. The bar & coin route is popular in Asia while the ETF route is popular in the West. Even today, 57% of gold ETF flows come from ETFs domiciled in North America. Most of these flows are tactical in nature i.e. inflow increase when gold prices are trending upwards and vice-versa. And all of this can happen very quickly, producing huge swings in gold price.
We saw heavy inflows during pandemic (safe haven & indiscriminate money printing in US), followed by three years of outflows. Gold was already rallying and the huge ETF inflow in 2025 created euphoria by Jan’26.
Unlike central banks or Asian investors, the Western investor still does not consider gold as a strategic allocation. Over the last 50 years, gold has been completely dropped off from the portfolios of US & Europeans. Approx 70% of family offices own zero gold.
However, that trend is also changing. Gold allocation for a typical western investor portfolio has risen from 0.7% in 2023 to 2.8% in 2025. In 2025, popular investors in US like Ray Dalio, Jamie Dimon, Morgan Stanley gave calls for significantly increasing gold exposure. Swiss Pension fund recently increased its gold allocation. If the western world were to increase its exposure to even 5% of overall portfolio, it will mean much bigger demand for gold in coming years.
Section 3 – Re-cap of the bull case for investing in gold
1) Fiscal mis-management & ballooning debt
Global debt has been rising rapidly since the global financial crisis of 2008, and accelerated into the fifth gear after the pandemic in 2020. Printing more money is the preferred route to “save the economy” from every form of economic slowdown. Global debt reached a new record high of USD 348 trillion, yet fiscal discipline is nowhere to be seen:
- From India’s Ladli Behen, Trumps “dividends”, French’s RSA for unemployed, Germany’s Kindergeld for children, governments across the world are taking more long-term liabilities
- The industry, the citizens, and voters have all got addicted to this and any form of austerity can result in governments losing elections, like we saw in France & UK
- The case of US is especially interesting – US is the world’s super power and US$ enjoys the reserve currency status. Its debt has surpassed $40 trillion mark, its annual interest payments now exceed $1 trillion and consume 20% of Federal tax revenue. This is the second year in a row where net interest payments by US government have exceeded its annual defense budget. When similar thing happened to UK, it lost its superpower status.
No country will default in its local currency, especially a superpower like US. It can print as much money as needed to repay. But in such a scenario, interest rates rise, and the value of the currency keeps going down (in comparison to hard assets like gold & land). We are in midst of such a scenario and this is extremely benign for gold.
2) Geopolitics & changing world order
America’s super-power status is silently being challenged by China, at a time when the debt burden of the US government is highest. Hence, we are witnessing America’s desperation in all areas – wars, tariffs, sanctions, and intimidation. Freezing of Russia’s forex reserves in 2022 in the aftermath of Russia-Ukraine war served as a wake-up call for all the non-western central banks -- US Treasuries were neither “risk-free” nor readily available.
Central Banks of China, Russia, Kazakhstan, Poland, Turkey, India have been significant buyers of gold since 2022. As debt & war problems become more prevalent, more central banks are expected to join this race for increasing their gold holdings.
3) Awakening of western investor & institutions
Over the last 50 years, gold has been completely dropped off from the portfolios of US & Europeans. Most individuals own less than 3% of their portfolio in gold; Approx 70% of family offices own zero gold; Pension funds & insurance companies have just about started considering gold.
If each of these investor’s categories end up have 5-8% of their portfolios in gold, it will be a big demand & price tailwind for years to come. Some prominent investors in the US have started advocating 10-20% allocation towards gold.
4) Inflation
When individuals like us fall into debt trap, the solution is simple i.e. reduce your expenses and improve your incomes. But government’s life is not so simple. They risk losing elections if they cut on any social programs. They risk spooking the stock markets if they cut industry incentives. Thus, the only way out for them is to try and earn more (grow more).
Growth is inflationary i.e. it creates huge demand for energy, metals, minerals, electronic components, etc. Also, some of the growth actions are compulsory - many nations also face an urgency to strengthen their defense capabilities (Europe & Middle East) and diversify their supply chains. Hence, there seems to be no near-term respite to inflation.
In the very long term, value of gold keeps pace with nominal inflation. Current environment is a perfect set-up for gold to remain valuable.
Section 4 – Back to the roller-coaster of 2026
Now that we have re-visited the long-term bull thesis on gold, let’s get back to the volatility of 2026. Gold prices were overheated in Jan-Feb’26 and needed to cool-off. The US-Iran war provided the reasons for exactly this. We also know there was some war related selling as well as margin-call based selling in gold between Mar-Jun26.
The closure of the Strait of Hormuz cut-off cash flows to oil producers in the Gulf region, who for years had purchasing gold instead of US Treasuries. On the other side, countries like Turkey, Russia, and Pakistan sold around 80 tons of gold to tide over trade pressures created by high oil prices.
Second, the escalation forced a wave of deleveraging because rising yields, increasing interest rate expectations, and a stronger US dollar triggered margin calls.
We now know that central banks and financial investors (ETFs) are the major swing factors for gold prices. From the data below, few trends are come out clearly:
| Quarter | Mar'25 | Jun'25 | Sep'25 | Dec'25 | Mar'26 | Jun'26 |
|---|---|---|---|---|---|---|
| Avg price ($) | $2860 | $3280 | $3455 | $4135 | $4872 | $4506 |
| Demand | 1,236 | 1,019 | 1,200 | 1,251 | 928 | 862 |
| Jewellery | 435 | 354 | 420 | 439 | 332 | 310 |
| Coins & bars | 334 | 316 | 328 | 428 | 477 | 307 |
| Central Banks | 237 | 178 | 226 | 208 | 57 | 289 |
| ETFs | 230 | 171 | 226 | 176 | 62 | -45 |
Source: World Gold Council
Central banks paused their buying in Jan-Mar26 quarter, probably due to the euphoric rally or due to developing war condition. They started buying again in Apr-Jun26 quarter, once the peak of the war was over and there was decent price correction.
ETF demand pattern has followed its “tactical” nature. Demand dropped in Mar26, when correction started and outflows happened in Apr-Jun26 quarter as gold prices remained weak.
Jewellery demand also followed its usual pattern i.e. it reduces when there are sharp spikes in gold prices. Also, there was some impact of Indian government’s duty measures on gold.
In the light of all of the above (over-heated price in Feb’26, war related liquidations, US Fed signaling, rising bond yields, and ETF selling), price correction of only 15-20% seems like a strong outcome. It seems more like a pause in the long-term rally rather than the end of rally.
Section 5 – A glimpse into the future (2030)
Gold price has rallied ~100% over the past two years and currently trades around $4400 per ounce. After such a strong rally, the natural question is “is there more juice left”. We just enumerated the four big fundamental trends that create a bullish long-term set-up for gold. Now let us see what long term ratios tell us about gold.
| Ratio (gold price = $4400) | Median | Current | Peak | Comment |
|---|---|---|---|---|
| S&P 500 to Gold | 0.7x | 1.5x | 5.0x | Gold needs to double to reach median |
| Nasdaq to Gold | 3.5x | 5.0x | 16.0x | Gold needs to go up 40% to reach median |
| Gold to US Mkt Cap | 39% | 42% | 80% | Gold is far away from past peak |
| Gold as % of central bank reserve | 22% | 25% | 62% | Bank gold holdings have to double to reach 1980 peak |
| Gold as % of western investor's portfolio | 2.5% | 8.6% | Gold holdings have to triple to reach 8.6% allocation |
Source: World Gold Council, IGWT report
Each of these ratios tell us that gold has to go up by 40% to 400% if it has to reach the median or peak levels witnessed in the past. The absolute upside implied by these ratios is not important, but the clear message is that the direction for gold is set and we are far away from any kind of peak.
For investors, having a decent exposure to gold is not just prudent, but essential. Gold may not make you win big, but it will definitely not let you lose. Globally, mining stocks offer an asymmetric bet on gold. In India, there are plethora of investing options where one can get an indirect exposure to gold – the gold loan NBFCs, the jewelry retailers, and the jewelry manufacturers.
Note: Many of the data points mentioned above have been obtained from World Gold Council and IGWT report. 100% of this article has been written by human intelligence. The above article should be treated as educational and not be construed as an investment advice.