Gold Rally May Pause as Investors Eye US Fed Policy Decision on Sep 17

Gold prices are expected to maintain their upward momentum though some consolidation could set in ahead of the US Federal Reserve's policy decision on September 17, analysts said.

Traders will focus on the trade inflation data to gauge the impact of tariffs, inflation numbers from major economies including UK and Euro zone, along with monetary policy meetings of Bank of England and Bank of Japan which will provide more guidance for bullion prices, they added.

"Gold prices continued their positive momentum and closed higher for the fourth straight week, however, the pace of upward momentum slowed with some consolidation seen during mid-week. The price moves of more than 10 per cent over past four-weeks has pushed investors/ traders on the back-foot as they have turned cautious and are reluctant to add fresh longs at current prices.

"However, the ongoing developments related to geo-political issues in the middle-east/ Russia-Ukraine and political developments happening in Europe/ Asia are keeping the bullion supported," Pranav Mer, Vice President, EBG - Commodity & Currency Research, JM Financial Services, said.

The price of precious metals is expected to remain positive, but investors may again see some consolidation as focus turns to the US Federal Reserve's meeting outcome on September 17, Mer added.

The Fed's two-day meeting is scheduled to begin on September 16, and will conclude on September 17, with a policy decision, followed by Chair Jerome Powell's press conference, set to draw attention amid rising tensions between the US President Donald Trump's administration and Fed officials.

On the Multi Commodity Exchange (MCX), the most traded gold futures for October delivery climbed Rs 1,616 or 1.5 per cent.

"The rally is not surprising taking in to consideration the effective tariffs of 50 per cent imposed on Indian imports in to the US combined with the continued escalation of Russia-Ukraine conflict in the recent weeks," Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies, Angel One said.

In the international market, Comex gold futures closed at USD 3,686.40 per ounce, before scaling USD 3,715.20 on September 9.

"Gold extended its powerful rally through the week, moving from already elevated levels to fresh record highs as shifting macroeconomic conditions reinforced its safe-haven appeal," said Riya Singh, Research Analyst, Commodities and Currency at Emkay Global Financial Services.

She added that gold has now surpassed its inflation-adjusted 1980 high, crossing USD 3,700 per ounce and logging a year-to-date gain of more than 40 per cent.

"Central bank buying in emerging markets remains a critical pillar, cushioning the market as Asian retail demand softens due to high domestic prices and widening discounts in Shanghai. This institutional and official sector support has offset weaker jewellery sales in India and China, where festival and seasonal purchases have slipped double digits compared to previous years," Riya Singh stated.

According to Singh, any sustained breach above current resistance levels could accelerate the march toward the psychologically significant USD 4,000 mark on Comex and Rs 1,15,000 per 10 grams on MCX later this year.

Meanwhile, silver mirrored the bullish performance of gold with sharper gains. Comex silver futures rose 1.62 per cent to settle at USD 42.83 per ounce after touching an intraday high of USD 43.04.

On the MCX, silver futures surged to a lifetime high of Rs 1,29,392 per kilogram.

"Silver outperformed gold on a percentage basis, highlighting its higher beta during risk-on phases for precious metals. Last week, silver marked its highest level since 2011 and recorded a year-to-date gain of nearly 40 per cent. ETF inflows have been remarkable, with global silver-backed holdings exceeding 1.13 billion ounces valued at more than USD 40 billion, surpassing total inflows for the entirety of 2024," Singh said.

She pointed out that silver's outlook remains positive, though more volatile than gold due to its reliance on sentiment and industrial cycles.

"As global manufacturing stabilises and renewable energy investment continues, silver's industrial base provides a longer-term cushion.

However, in the near term, if rate-cut expectations are delayed or risk appetite diminishes, volatility could increase. "A medium-term advance toward USD 43 per ounce on Comex and Rs 1,35,000-1,38,000 per kilogram on MCX is possible should momentum hold," Singh added.

Analysts said that while the near-term outlook suggests some consolidation, the broader trend for precious metals remains firmly upward, supported by central bank buying, safe-haven demand, and expectations of monetary policy easing.