Gold prices have shown resilience, gaining around 0.7% last week and extending the move above $4,400 at the start of this week, briefly testing the $4,450 mark before Tuesday's global bond selloff pulled prices back toward 4,340-4,360. According to The Times of India, the broader trend remains positive despite the recent volatility, with the rally supported by softer US inflation and retail-sales data that reduced expectations of a September Fed hike. The recovery has been further bolstered by a weaker dollar and renewed investor demand, creating a supportive environment for precious metals. Vedika Narvekar, Research Analyst - Commodities & Currencies at Anand Rathi Shares and Stock Brokers, notes that while volatile, the near-term outlook remains optimistic.
The shift in Fed rate hike expectations reflects successive soft US inflation prints and the weak retail sales report, prompting traders to pare back expectations for US central bank policy tightening by year-end. Market pricing for a September quarter-point hike flipped to a near-65% chance of a hold after unexpected job losses in July, lower-than-expected consumer price inflation and weaker retail sales. A Reuters poll conducted between August 12 and 17 found that a strong majority of economists expect the Fed to keep its key interest rate unchanged through the end of 2026. The probability of the US Federal Reserve hiking rates by the year-end has dwindled from 80% seen a month ago to 68%. Over 90% of 104 economists polled by Reuters see the Federal Reserve keeping benchmark interest rates unchanged at 3.5%-3.75% in September and for the rest of this year, with nearly 80% seeing no change through the end of next year. Traders will be studying minutes from the Fed's July policy meeting, due for release Wednesday, for clues to the central bank's rate path. Chairman Kevin Warsh's remarks at the Fed's annual Jackson Hole symposium later this month will also be closely watched.
In recent weeks there has been a resurgence of a theme that helped power gold's rally through 2025 — that of angst over surging government spending and a flood of long-dated bond sales. According to The Hindu BusinessLine, yields on 30-year US Treasuries rose to the highest since 2007 this week, while French borrowing costs hit the loftiest since 2008 and their German peers traded at 2011 levels. UK and Japanese yields also gained, creating pressure on gold prices. Higher yields can weigh on gold if driven by monetary tightening, making the non-yielding metal less attractive to investors. However, if high long-end yields instead "reflect concerns about fiscal sustainability rather than economic strength, the historically negative relationship between gold and Treasury yields may continue to weaken," Hansen noted, creating "an unusual but potentially supportive environment for gold."
Global gold ETFs added about $3 billion in July, reversing two months of outflows, while holdings increased by 39 tonnes year-to-date. According to The Times of India, August flows have also remained positive, indicating sustained institutional interest in gold as an investment vehicle. Central-bank demand continues to provide a strong floor, with China extending its gold-buying streak to 21 consecutive months, demonstrating the continued importance of official sector support. A fund manager survey by Bank of America Corp. released Tuesday showed the share of fund managers who said gold was undervalued hit the highest level since March 2023, suggesting institutional confidence in the metal's long-term prospects.
The World Gold Council reported that gold-backed ETFs added only $7 billion in the first half of August, taking their assets under management to $582 billion. According to The Hindu BusinessLine, spot gold is expected to trade with a positive bias in the short run on reduced rate hike possibility, soft US data and rangebound crude oil prices. Support is seen at 4385/4290-4300/4200-$4220. For Indian investors, global prices are only one part of the equation. Domestic gold and silver rates also depend on the rupee-dollar exchange rate, import costs, taxes and local market conditions, so even if international bullion prices rise, Indian prices may not move by the same percentage. It is advisable to buy into the dips rather than chasing the rally. Technical indicators pose a challenge, with the relative strength index suggesting gold is nearing short-term "overbought" territory, while the 200-day moving average, currently at $4,504, remains a strong resistance level.
