Gold rates: Where are they heading after US Fed rate cut?

Gold prices in India and abroad have been on a roller-coaster ride following the recent US Federal Reserve rate cut. After hitting a fresh peak of Rs 1,06,666 per 10 gm on the Multi Commodity Exchange (MCX), domestic gold prices retraced by around 0.50%, primarily due to a rebound in the US dollar after the 25 basis points Fed rate reduction. Despite the short-term correction, MCX gold rates have recorded gains for the fifth consecutive week, with the October 2025 gold futures ending at Rs 1,09,900 last Friday. Internationally, COMEX gold touched a record $3,707.65 per troy ounce last week.

Typically, gold prices benefit from US rate cuts as lower interest rates reduce the opportunity cost of holding non-yielding assets. However, experts noted that the recent scenario was slightly different. According to Ross Maxwell, Global Strategy Lead at VT Markets, “While rate cuts usually support gold, the Fed emphasized data dependency and suggested future cuts would be more gradual. The rebound in the USD and rising US Treasury yields after Chair Powell’s comments tempered gold expectations in the short term.”

Puneet Singhania, Director at Master Trust Group, explained the near-term pressure: “The 25 bps reduction was already priced in by the market. Traders positioned for easing cycles booked profits after gold reached record highs, causing minor selling pressure. Historically, gold performs strongly in rate-cutting cycles when inflation remains high.”

Is it the right time to buy gold?

Market watchers remain cautiously optimistic. Maxwell said, “The long-term outlook for gold remains bullish. Slowing US growth, elevated inflation risks, central bank demand, and forecasts of further rate cuts later this year are supportive. Short-term volatility could occur if economic data surprises positively or if rate cuts are delayed, but over the long term, gold could regain momentum and even touch new record highs.”

Gold rally

The World Gold Council (WGC) attributes the current gold rally to fears of global inflation, economic uncertainty amid US trade disputes, and geopolitical tensions. Falling interest rates and ongoing uncertainty are expected to maintain investor appetite for gold, particularly through ETFs and over-the-counter transactions.

Jewellery demand in India has been impacted by high prices, with Q2 2025 demand at 341 tonnes, down from 395 tonnes in Q2 2024. However, demand is expected to pick up during the upcoming festival season, with consumers considering 18-carat or 14-carat gold and options studded with diamonds or gemstones. Many are also exchanging old jewellery for new pieces, aided by GST savings on certain products.

Central banks’ gold purchases have moderated this year. Global central banks added 166 tonnes in Q2 2025, a 33% decline from Q1, marking the lowest quarterly demand since Q2 2022. Notable purchases include the National Bank of Kazakhstan (3 tonnes), the Central Bank of Turkey (2 tonnes), and the Czech National Bank (2 tonnes). Poland remains the largest net purchaser in 2025, acquiring 67 tonnes until July. Despite the moderation, central bank buying is still about 40% higher than the 2010-2021 average, reflecting sustained strategic interest in gold.

With domestic and international rates influenced by economic policies, MCX gold could touch Rs 1,12,000 per 10 gm, while COMEX gold may reach $3,750 per troy ounce if current trends persist. For investors, understanding market dynamics, global central bank moves, and the impact of Fed decisions will be crucial for timing gold purchases and maximizing returns.