Gold falls 24.6% from 2026 peak: Mirae Asset MF explains what is driving prices

The fund house attributed the recent weakness primarily to the rise in US Treasury yields. It put the US 10-year Treasury yield at 5.27% as of October 6, compared with around 4.1% in October 2025. Gold does not generate interest income, making it relatively less attractive when government bond yields rise. Expectations of interest rates staying higher for longer, a stronger US dollar and profit-booking following the rally in 2025 and 2026 have also weighed on prices, according to Mirae Asset Mutual Fund. The fund house said the correction appeared cyclical rather than a sign of weakening long-term fundamentals. However, it acknowledged that higher yields and uncertainty over the US Federal Reserve's next moves could continue to trigger price fluctuations.

Mirae Asset Mutual Fund expects central bank gold demand to remain around 700 tonnes in 2026, compared with an average of 470 tonnes between 2010 and 2021. Its note also cited data indicating that 89% of central banks surveyed expected global gold reserves to increase, while 45% planned to raise their own gold holdings. The note referred to an increase of 41 tonnes in central bank gold purchases, although the period for this figure would need to be specified before publication. Central banks have been diversifying their reserves to reduce reliance on the US dollar. Gold's liquidity, store-of-value characteristics and absence of sovereign credit risk have supported its role as a reserve asset, the fund house said.

The fund house identified the diversification of foreign exchange reserves away from the US dollar as another structural factor supporting gold demand, particularly among emerging economies. Geopolitical uncertainty, including risks related to energy security, trade routes and sovereign debt, could also sustain demand for gold as a portfolio hedge. Mirae Asset Mutual Fund said these factors continued to support its medium- to long-term outlook despite near-term pressure from bond yields.

The upcoming festive and wedding season could provide additional support to physical gold demand in India, according to the fund house. The period covering Navratri, Dussehra, Dhanteras, Diwali and weddings typically sees increased gold purchases. However, seasonal demand does not guarantee higher prices. Actual jewellery demand can also depend on prevailing gold rates and consumers' purchasing power.

Mirae Asset Mutual Fund remains constructive on gold over the medium to long term, saying continued central bank accumulation, reserve diversification, geopolitical uncertainty and physical demand could support prices. The fund house believes markets may have already priced in a significant part of the expected monetary tightening, although changes in interest-rate expectations and bond yields could continue to influence gold in the near term. It sees gold as a potential portfolio diversifier and a hedge against inflation and macroeconomic uncertainty. Its assessment that prices below $4,200 per ounce present an investment opportunity is the fund house's own view and should not be interpreted as a guaranteed price floor or assured return. Gold prices can move sharply in response to interest rates, currency movements and investor sentiment. Investors considering gold ETFs should account for this volatility and assess gold's role within their overall asset allocation.