US Federal Reserve maintains hardline stance, causing gold prices to decline this week
Gold prices in India have experienced fluctuations in recent times, influenced by a combination of domestic and international factors. According to the India Bullion and Jewellers Association (IBJA), gold traded weak by Rs 350 at Rs 97,700 in MCX this week.
The sentiment for safe-haven assets has been dampened due to the U.S. Fed's continued hawkish stance and no indication of near-term rate cuts. This has led to a decline in gold prices, as investors seek returns from other investment avenues.
However, a 5% shift of global reserves into gold could trigger a sustained and significant rally in its price. The global forex reserves, totalling around $12.5 trillion, could potentially play a significant role in gold's future price movements.
The Indian Rupee (INR) has weakened 1.88% over the past month and 4.06% in one year, remaining under pressure from a strong US dollar. This depreciation of the INR against the dollar increases local costs as international gold prices rise.
Geopolitical conflicts, such as those in the Middle East and Russia-Ukraine, and trade tensions, like US-China tariffs, have created global investor uncertainty that fuels gold's safe-haven demand. This uncertainty, combined with high domestic inflation (currently above 5%), anticipated interest rate cuts globally and in India, and a weakening rupee, drove gold prices to record highs in 2025, crossing ₹100,500 per 10 grams.
Domestic demand patterns have shifted markedly. While traditional jewelry demand has somewhat declined, investment in Gold ETFs and other financial products has risen sharply. This modernizing outlook on gold as part of India's evolving economic architecture reflects a shift from viewing gold as a cultural asset or static store of value.
Analysts warn that corrections are possible if global conditions improve—for instance, a stronger US dollar, easing geopolitical risks, or altered liquidity conditions might trigger price retreats. However, the overall trajectory is expected to remain volatile as gold increasingly functions as both a monetary tool and an investment amid complex global and domestic economic feedback loops.
In summary, gold’s volatility in India stems from inflation, currency depreciation, geopolitical uncertainty, evolving investment trends, and central bank actions, which collectively drive fluctuating demand and prices. The price of 24-carat gold (10 gram) is expected to remain within the range of Rs 97,000 to Rs 98,500 in the near future, according to analysts.
The gold market is valued at $23 trillion, making it a significant player in the global economy. Gold is considered as the only credible alternative to the U.S. dollar as a reserve currency, adding to its appeal as a safe-haven asset. The price of 24-carat gold (10 gram) started at Rs 98,446 on Monday this week and rose to Rs 99,017 on Wednesday, before ending the week at Rs 98,534. Trading on Comex gold hovered near $3290 this week. Key U.S. data due later today is keeping participants cautious, which could impact gold prices in the coming days.
Finance plays a crucial role in determining gold prices as investors seek returns from different investment avenues, causing a decline when the US Fed maintains a hawkish stance and does not indicate near-term rate cuts. The gold market, valued at $23 trillion, is also influenced by concerns about currency depreciation, geopolitical uncertainty, evolving investment trends, and central bank actions, ultimately driving fluctuating demand and prices.
