Diwali 2026: Gold trades at 22% discount from January peak; will it lift Dhanteras sentiment?

Gold, one of the most sought-after purchases during India's festive season, is entering Dhanteras 2026 after a sharp correction from its record highs. Domestic gold prices are trading at around ₹1.42 lakh per 10 grams, down more than 22% from their January peak of approximately ₹1.80 lakh, raising the question of whether the correction will revive buying sentiment during the auspicious occasion.

For Indian households, gold is traditionally viewed as a long-term store of value rather than an instrument for short-term gains. The cultural significance of gold buying during Dhanteras, coupled with its appeal as a liquid investment, has made the precious metal an integral part of household portfolios. Indian households collectively hold the world's largest private gold reserves, valued at more than $3 trillion, according to Axis Securities.

The correction comes after an extraordinary rally over the past few years. Domestic gold prices have risen from approximately ₹47,600 per 10 grams in November 2021 to around ₹1,42,750 in late October 2026, translating into an absolute return of nearly 200% and a compounded annual growth rate of 24.53%.

However, the yellow metal has faced considerable headwinds this year, with inflation concerns, elevated bond yields, a stronger US dollar and shifting expectations around Federal Reserve monetary policy triggering profit-booking.

Will lower prices translate into stronger Dhanteras buying?

The more than 22% correction from January's peak could make gold more attractive for buyers who stayed away during the rally. However, whether this translates into a sustained revival in festive demand will depend on price movements, consumer sentiment and expectations around the precious metal's future trajectory.

Axis Securities believes the current levels offer long-term investors an opportunity to accumulate gold gradually rather than attempt to time the market. The brokerage expects gold to deliver returns of around 20-25% by next Dhanteras, with a target price of ₹1.65 lakh-₹1.71 lakh per 10 grams, provided favourable macroeconomic and geopolitical developments materialise.

"Current gold prices appear attractive for investors, having corrected more than 20% from their peak," Axis Securities said in its report, adding that the correction presents long-term investors who missed the rally with an opportunity to add gold to their existing portfolios in a staggered manner.

The brokerage expects some near-term volatility due to the possibility of further interest rate hikes but believes a moderation in inflation and a shift towards monetary easing in 2027 could support a recovery.

Tapan Patel, Fund Manager - Commodities at Tata Asset Management, also sees the recent correction in precious metals as a healthy consolidation following the sharp rally witnessed last year.

"Gold and silver prices have witnessed healthy correction in 2026 compared to the record rally during the same time in previous year. The macro-economic factors like inflation, elevated yields and central bank tightening have dominated for short term over supportive long-term factors," Patel said.

He believes concerns over global growth, central bank diversification and the risk of currency debasement amid US fiscal concerns will continue to provide structural support for long-term investments in gold and silver.

Why has gold corrected from its January peak?

Gold prices touched a record high of nearly $5,595 per ounce in January 2026, supported by geopolitical uncertainty, strong investment demand and expectations of monetary easing by the US Federal Reserve.

However, the outbreak of the conflict involving Iran, the US and Israel pushed crude oil prices sharply higher, from around $60 to $120 per barrel, fuelling concerns about global inflation. This shifted market expectations from interest rate cuts towards further monetary tightening.

The US Federal Reserve raised its benchmark interest rate by 25 basis points in September, taking the target range to 3.75-4%, before holding rates at the same level in October. The October decision witnessed two dissenting votes in favour of another 25-basis-point hike, reflecting concerns about persistent inflation.

Higher interest rates and bond yields increase the opportunity cost of holding gold, which does not generate regular income. A strengthening US dollar has added to the pressure. Axis Securities noted that the Dollar Index has gained around 4% recently, weighing on the yellow metal.

Technical indicators have also weakened. MCX gold faced strong resistance around ₹1.60 lakh, which gradually turned into a supply zone after repeated unsuccessful attempts to sustain above that level. A weekly close below the 20-week exponential moving average in September further weakened the bullish outlook.

For Dhanteras buyers, the correction offers some relief after the sharp rally, but the outlook remains dependent on inflation, interest rates and geopolitical developments. The brokerage's projected 20-25% upside by next Dhanteras suggests that the long-term investment case remains intact, even as investors may need to brace for further volatility.