Gold price outlook: Gold prices came under sharp pressure on Friday as a rebound in the US dollar triggered profit booking in the precious metal. However, despite the decline, bullion remained on track to register its first monthly gain in five months, underlining the resilience that has kept prices above the psychologically important $4,000 per ounce mark.
The weakness on Friday was followed by a recovery in the US dollar, which steadied after plunging about 2.4% on Thursday, its steepest one-day fall since January 2023. A stronger greenback makes dollar-denominated bullion more expensive for overseas buyers, typically weighing on demand.
Yet, the broader picture remains constructive. Gold has gained over 1% in July, marking its strongest monthly performance since February. The rally has largely been driven by softer-than-expected US inflation data, which prompted traders to scale back expectations of further Federal Reserve rate hikes this year. While Federal Reserve Chair Kevin Warsh reiterated the central bank’s commitment to returning inflation to its 2% target, he stopped short of signalling that another rate hike was imminent. Expectations that the Fed could eventually broaden its focus beyond its preferred inflation measures have also helped keep gold supported above US$4,000.
Why analysts remain positive on gold
Despite the latest correction, many market experts continue to see a favourable medium- to long-term outlook for gold.
The World Gold Council believes current prices broadly reflect an environment of moderate economic growth, cooling but still elevated inflation, and expectations of only limited additional central bank tightening. Under these conditions, it expects gold to remain largely range-bound within around 5% of current levels.
However, the Council believes several developments could reignite the rally. These include a weaker global economy, renewed geopolitical tensions, easing interest-rate expectations or fresh buying following the recent correction.
The geopolitical backdrop continues to provide support. Escalating tensions involving the United States, Iran and Iran-backed Houthi forces have renewed safe-haven demand.
At the same time, higher crude oil prices could intensify global inflationary pressures, complicating the Federal Reserve’s policy outlook. While elevated interest rates are generally negative for non-yielding assets like gold, geopolitical uncertainty has helped offset some of that pressure by increasing demand for portfolio hedges.
Adding to the bullish case, Jefferies Global Head of Equity Strategy Christopher Wood believes investors should once again start building exposure to the yellow metal.
“The time has come for investors to start accumulating gold and gold mining stocks again after an extended pause to refresh.”
In a recent Greed and Fear report, Wood argued that the investment boom surrounding artificial intelligence could eventually resemble the dot-com bubble. He said that just as the technology sell-off in the early 2000s eventually spread to the broader economy, a similar outcome could occur if the current AI investment cycle unwinds.
Outlook: Fed policy and geopolitics remain key triggers
Analysts believe gold is likely to remain volatile in the near term as markets continue to assess the Federal Reserve’s policy trajectory alongside rapidly evolving geopolitical developments.
Colin Shah, Managing Director of Kama Jewelry, believes the metal is balancing competing macroeconomic forces.
“The steady resilience of gold around the US$4,080 mark reflects a market balancing two powerful forces—a hawkish monetary policy and escalating geopolitical risks in the Middle East. While the Fed has kept rates unchanged and reduced immediate expectations of a September hike, gold’s safe-haven appeal is likely to revive. However, the central bank’s firm commitment to a 2% inflation target creates a challenging near-term backdrop for bullion.”
Shah added that the RBI’s monetary policy decision next week, the US Federal Reserve’s September meeting, and domestic as well as global developments would be crucial in determining gold prices and jewellery demand during the festive season. He remains optimistic about a gradual stabilisation in prices but believes investors should closely monitor incoming developments.
Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, expects the market to remain range-bound until a stronger catalyst emerges.
“Gold remained volatile during the week, with MCX Gold falling around 0.85% as prices consolidated. Despite a weaker US dollar and a sharp correction in crude oil prices, bullion failed to attract meaningful buying interest because uncertainty over the Federal Reserve’s policy outlook continues to dominate sentiment. MCX Gold is expected to trade in the ₹1,40,000- ₹1,44,000 range in the near term, with the next major move depending on upcoming US economic data and expectations for Fed policy.”
While near-term volatility is likely to persist, the broader consensus suggests that safe-haven demand and easing monetary policy expectations could continue to underpin prices over the coming months.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
