New Delhi [India], January 6 : Gold as a reserve currency by global central banks may continue in 2026, the pace, however, may slow, driven by easing geopolitical risks, evolving monetary policy dynamics and potential shifts in the US dollar trajectory, according to a recent report by YES Bank Economics Research.
The report notes that heightened global uncertainty and increasing bets against the US dollar as a dominant reserve currency had led to a sharp surge in central bank gold purchases in recent years. While this structural trend is expected to persist, the momentum of accumulation may moderate in 2026 as risk premiums cool and macroeconomic conditions stabilise.
YES Bank report highlighted that the US Federal Reserve's rate-cutting cycle, which resumed in September 2025, has been a key driver supporting gold prices, alongside weakening labour market data and softer inflation prints in the United States. Expectations of further rate cuts could continue to exert depreciation pressure on the dollar index, lending near-term support to gold.
However, the report cautioned that the probability of dollar appreciation in the second half of 2026 cannot be ruled out, particularly due to growth differentials between the US and other major economies such as Europe. A stronger dollar could emerge as a headwind for gold prices and temper central bank demand.
Central bank net gold purchases have remained well above long-term averages, reflecting sustained diversification away from traditional reserve assets. Yet, the report observed that any easing in geopolitical tensions could reduce the urgency for aggressive reserve accumulation.
On prices, YES Bank's technical analysis projects gold extending towards USD 4,500-4,550 per ounce, provided it sustains levels above USD 4,400, while a drop below USD 4,200 could invalidate the bullish outlook.
The report added that silver continues to outperform gold, supported by strong industrial demand from sectors such as renewable energy, electric vehicles, data centres and defence, alongside a tightening supply environment.
Overall, while gold's role as a strategic reserve asset remains intact, the report expects central bank buying to transition from an exceptional surge to a more measured pace in 2026.
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