This rebound coincides with growing expectations that the prolonged 40-day US federal shutdown may soon be resolved.
According to Renisha Chainani, Head of Research at Augmont, “Gold and Silver both break out of their consolidation range at $49 and $4,050, respectively, hitting a two-week high as worries about the US economy grow.”
The US Senate recently approved a bill to reopen the federal government by a vote of 60–40, a move seen as a major step toward ending the shutdown. “The decision opens the door for the shutdown to end as soon as this week, though there are still obstacles to overcome,” Dr Chainani noted.
Markets are also factoring in the possibility of lower interest rates from the US Federal Reserve in December, with traders currently pricing in a 67% chance of a quarter-point cut. This has contributed to bullish sentiment in precious metals, which tend to benefit from lower interest rates.
In the domestic context, gold has now moved above Rs 1,22,000, breaking out of its earlier consolidation. Ross Maxwell, Global Strategy Lead at VT Markets, offered a broader view, commenting that while “an end to the uncertainty would strengthen the USD and reduce safe-haven demand for gold,” prices have instead “reacted bullishly,” reflecting expectations of “continued fiscal spending, rising US debt levels, and a weaker USD in the medium term.”For India, he said that domestic gold prices are typically guided by international trends but also depend on the INR exchange rate and local demand. “A stable or slightly weaker rupee will further add weight to any rise in international gold prices,” Maxwell noted.
He further explained that with India entering a high-demand period driven by the wedding and festive season, domestic sentiment is likely to remain robust. “Therefore, in the short term, the outlook for Indian gold prices remains bullish,” he added.
Looking ahead, Maxwell stated, “If the global rally continues and the rupee remains stable or weakens slightly, prices could move initially toward Rs 1,26,000.” However, he cautioned that in case US yields rise and the USD strengthens, a correction to Rs 1,10,000 is possible, with “strong support around the Rs 1,00,000 area” if the downturn deepens.
On the demand side, he observed, “The immediate impact will mean steady demand from the wedding season and renewed interest from investors seeking a hedge against uncertainty.” However, Maxwell also warned that “if high prices remain, then this can reduce demand for jewellery if the rally extends too far.”
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In summary, while the end of the US shutdown and supportive global cues have pushed Indian gold prices to multi-week highs, analysts are keeping a close watch on further developments in the US economy, currency movement, and seasonal demand trends to gauge how far the rally may extend.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
