Topic 3: BULLION: ENDURING HEDGE

India’s bullion market delivered an exceptional performance in January 2026, decisively outperforming equities and debt as investors sought safety amid rising geopolitical risks, currency volatility, and global uncertainty. Gold and silver prices on the MCX recorded sharp gains during the month, with silver stealing the spotlight through a historic rally, before late-month profit booking trimmed some of the highs. Gold began January trading near ₹1.54 lakh per 10 grams, supported by early optimism in financial markets. However, momentum accelerated sharply mid-month as risk sentiment deteriorated. Prices surged to an all-time high of nearly ₹1.67 lakh per 10 grams by January 29 before easing marginally toward the end of the month, settling around ₹1.62 lakh following profit booking. Overall, gold posted a robust monthly gain of approximately 15–18%. Silver’s performance was even more dramatic. Starting the month near ₹3.25 lakh per kilogram, MCX silver futures exploded to a lifetime high of around ₹3.83 lakh per kilogram by January 28—marking a staggering 50–60% monthly rise, its strongest since 1979. While prices softened slightly in the final sessions due to global ETF outflows, silver still closed the month with extraordinary gains, significantly outperforming gold. The rally in bullion was largely driven by escalating geopolitical tensions that triggered a global flight to safety. Mid-January saw heightened uncertainty after US President Donald Trump threatened 100% tariffs on Indian imports linked to Russia-related oil purchases. This rhetoric, combined with political instability in Venezuela and renewed tensions involving Iran, revived fears of supply disruptions and inflationary pressures.
Global equity markets corrected by nearly 3–3.5% during the month, while volatility indicators surged, reinforcing bullion’s appeal as a hedge. Capital flows reflected this shift, with an estimated $2–3 billion moving from global equities into bullion-backed ETFs, a trend mirrored domestically through increased physical buying and futures positioning.
A sharp depreciation in the Indian rupee further amplified gains in domestic bullion prices. Persistent foreign portfolio investor outflows from equities and sustained RBI intervention in currency markets pushed USD-INR beyond key resistance levels, weakening the rupee by over 6% during the month. By late January, the rupee had slid past 91 per dollar.
While global gold prices rose about 10% to around $2,650 per ounce, rupee depreciation magnified gains in the domestic market to nearly 18%. Higher import duties and increased speculative activity on MCX further reinforced upward price momentum, particularly in gold.
Silver’s exceptional rally was underpinned by a structural supply crunch. Global silver mine output remained largely flat, while industrial demand surged, driven by rapid expansion in solar energy, renewable infrastructure, electric vehicles, and electronics. India’s silver imports declined sharply due to higher duties and trade restrictions, tightening domestic availability.
These factors created pronounced backwardation in silver markets, with spot premiums rising sharply as industrial users and jewellers competed for limited supply. This imbalance propelled silver well ahead of gold in percentage terms during the month.
Toward the end of January, both gold and silver saw modest pullbacks of 2–4% as stronger US economic data boosted the dollar and prompted short-term profit booking. However, domestic physical demand—supported by pre-Budget buying and seasonal factors—remained resilient, cushioning deeper corrections.
Overall, January 2026 reaffirmed bullion’s role as an effective hedge against geopolitical risk, currency weakness, and financial market volatility. While near-term consolidation is possible, the structural drivers supporting precious metals remain firmly in place.