US-Venezuela conflict: Is it the right time to increase exposure to gold?

Escalating tensions between the US and Venezuela have further aggravated the rally in gold prices. The yellow metal climbed by over ₹2,000, or 1.5%, to ₹1,38,270 per 10 grams in the domestic spot market in intraday trade on Monday, 5 January. Silver prices saw even steeper gains of 3% to trade at ₹2,43,530 per kg.

Gold prices tend to rise during periods of geopolitical uncertainty. However, the sharp rally over the past year has raised questions about how much further the yellow metal can climb and whether a deeper correction is imminent.

Over the last one year, gold has surged over 78% on central bank buying, US Fed rate cuts, geopolitical uncertainties, and strong inflows in exchange-traded funds (ETFs). Silver prices have soared by more than 170%, primarily on strong industrial demand amid tight supply, and strong retail buying.

"As geopolitical pressures continue to escalate with volatile markets being more than receptive to the problem, gold as an asset class is again under the spotlight for being an excellent safe-haven asset class," said Aksha Kamboj, Vice President at India Bullion and Jewellers Association (IBJA) and Executive Chairperson of Aspect Global Ventures.

"Moreover, the current scenario is resulting in gold prices touching record highs as investors as well as central banks pour in increased amounts of gold once again, thus indicating the prominence of gold as an investment option even during uncertain times," Kamboj said.

Gold has significant tailwinds

Gold has significant tailwinds in place for a healthy upside in 2026. The current geopolitical set-up appears to be favourable for the yellow metal.

As VK Vijayakumar, Chief Investment Strategist at Geojit Investments, pointed out that the year 2026 has begun with major geopolitical developments which can have profound consequences.

"The US action in Venezuela has the potential to further destabilise global geopolitics. The Russia-Ukraine conflict is likely to linger longer; there can be worsening of the protests in Iran, and how the Iranian regime reacts to that in the context of the threat of intervention by Trump; and perhaps even China might use this time of huge uncertainty for the annexation of Taiwan. The huge uncertainty and unpredictability of geopolitics will influence the market, too," said Vijayakumar.

Additionally, the US Fed's further rate cuts will boost gold prices. At the current juncture, market participants are expecting two rate cuts by the US central bank this year. Non-yielding bullion sees increased buying in times of rate cuts.

According to Aamir Makda, commodity and currency analyst at Choice Broking, the US-Venezuela conflict is a tactical accelerator for gold, but it does not change the core medium-term thesis, which remains tied to the Federal Reserve.

Is it the right time to buy gold?

For medium to long term, yes. But, bullion prices may remain volatile in the near term, reacting to global cues and the dollar's movement.

Experts suggest buying gold on corrections.

"As geopolitical risks rise, with Trump’s threats to resource-rich nations like Greenland, Cuba, and Mexico following the Venezuelan operation, global competition for critical resources is intensifying. This is likely to push major economies and BRICS nations to accelerate industrial development and, at the same time, encourage central banks to continue buying gold to diversify their reserves," Kaynat Chainwala, AVP of commodity research at Kotak Securities, noted.

In this environment, Chainwala underscored, taking measured positions in gold and other hard assets makes sense, as ongoing central bank purchases, de-dollarisation, and the drive for self-reliant manufacturing support long-term demand.

On the other hand, analysts at ICICI Direct believe gold is vulnerable to profit booking after last year's steep rise. Additionally, they believe the current levels are not favourable for fresh investments, and the risk-reward ratio is less favourable.

"Any well-founded progress in the peace deal between Russia and Ukraine, the risk premium may decline. Additionally, if the US calms its tariff wars and improves its relations with major trading partners, it will weigh on prices," said ICICI Direct.

However, the brokerage firm underscored that major drivers, such as sticky inflation, high government debt, the US Fed rate cut, the dollar's weakness, and strong retail demand for ETFs, are still in place, and fundamentals still point towards further upside in 2026.

In case of any meaningful correction, ICICI Direct analysts believe the floor price for gold should be near $3,500 and $3,600. On the higher side, prices may rally towards $4,800-$5,000 level.

On the MCX, the support zone for gold lies near ₹1,05,00 and ₹1,12,000 levels. On the higher side, prices may move further north towards ₹1,55,000 and ₹1,60,000, said the brokerage firm.

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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.