MCX gold scales three-month high as dollar retreats and US rate hike fears fade
Indian gold futures extended a five-week rally to a three-month high, driven by a weakening US dollar and shifting expectations around Federal Reserve monetary policy.
MCX gold futures extended a five-week rally to close at ₹1,62,438 per 10 grams, marking their highest level in over three months. The contract gained nearly ₹8,000 this week, pushing its August advance to 13.3% and its year-to-date return to 20%.
This sustained momentum has allowed the yellow metal to recover significantly from earlier losses. Bullion is now trading just 10% below its January record of ₹1,80,779, narrowing the gap from the 21% discount seen at the start of the month. Silver also posted strong gains, rising ₹10,673 to settle at ₹2,48,124 per kilo.
The rally is primarily underpinned by a weakening US currency and shifting interest rate expectations. The dollar index fell to a three-month low of 98.44 before closing marginally higher at 98.57, making dollar-denominated assets cheaper for international buyers. Concurrently, market expectations for an imminent Federal Reserve rate hike have diminished.
These monetary shifts are occurring against a backdrop of severe US fiscal strain, with the national debt surpassing $40 trillion. Thirty-year Treasury yields reached their highest level since 2007, driven by heavy debt issuance and geopolitical risks. In response, Treasury Secretary Scott Bessent indicated the government may expand buybacks of longer-dated debt to help rein in borrowing costs.
Market participants are now looking toward the Federal Reserve’s Jackson Hole symposium next Friday for further policy clarity. Chairman Kevin Warsh will deliver a pivotal address following a divided July meeting where rates were held unchanged. His tone will be closely scrutinized for signals on how the central bank intends to navigate persistent price pressures.
Ponmudi R, CEO of Enrich Money, noted that the commodity outlook remains constructive for precious metals despite high volatility in energy. He warned that elevated Treasury yields and the inflationary impact of rising crude oil prices pose key risks to the current bullion rally.
From a technical perspective, Ponmudi highlighted that the weekly RSI has reached 65.03 while the daily RSI sits at an overbought 76.10. Immediate resistance sits between ₹1,62,500 and ₹1,63,000, with a sustained break above the latter targeting ₹1,65,000. Downside support is established at ₹1,58,500, and a breach of this level would suggest a deeper correction is underway.
