Gold prices hit two-week high on Fed uncertainty, weaker dollar; what's next

Gold prices edged higher on Tuesday (August 26), touching their strongest level in two weeks as a softer dollar and renewed uncertainty over the US Federal Reserve’s policy direction boosted demand for the safe-haven asset. Spot gold rose 0.2% to $3,371.28 per ounce by 0309 GMT, its highest since August 11. Meanwhile, US gold futures for December delivery traded steady at $3,418.90 an ounce.

In the Indian market, gold was priced at Rs 1.01 lakh per 10 grams for 24 karat and Rs 93,040 for 22 karat, according to Goodreturns data.

The gains followed a political jolt in Washington after US President Donald Trump dismissed Federal Reserve Governor Lisa Cook over alleged mortgage borrowing impropriety. The move unsettled markets, raised fresh doubts about the Fed’s independence, and pressured the US dollar index, which slipped 0.2%. A weaker dollar typically makes bullion more attractive for overseas investors.

Aksha Kamboj, Vice President of the India Bullion & Jewellers Association (IBJA), said markets are in a consolidation phase following a sharp rally that pushed gold above the ₹100,000 mark earlier this month. “While prices have softened on expectations of a Fed rate cut in September, sentiment remains cautiously positive, particularly with India’s festive season approaching,” she noted. “Underlying investor demand remains strong given gold’s role as an inflation hedge and safe-haven asset.”

Darshan Desai, CEO of Aspect Bullion and Refinery, added that Trump’s dismissal of Cook drove investors into gold as equity markets wobbled. He expects prices to remain supported if concerns over the Fed’s independence persist. “Anticipation of a September rate cut is a key driver for bullion at this stage,” he said.

Fed Chair Jerome Powell recently hinted that a rate cut could be considered in September while reiterating caution over inflation risks. Since gold does not yield interest, it tends to benefit from lower rates as the opportunity cost of holding the metal declines.

Attention now shifts to Friday’s release of the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge. Analysts expect gold to remain volatile ahead of the data. Rahul Kalantri, VP Commodities at Mehta Equities, highlighted support for bullion at $3,352–3,335 per ounce and resistance at $3,395–3,410. In India, key levels are ₹1,00,240–99,850 for support and ₹1,00,950–1,01,150 for resistance.

Looking ahead, analysts say gold is consolidating but remains biased upward, with markets betting on a Fed rate cut at its September 16–17 meeting. Broader factors such as global trade tensions, geopolitical risks, and progress in Russia-Ukraine talks will also influence sentiment.