Analysts say hawkish Fed stance and easing geopolitical risks are cooling the bullion rally
Ziraat Times Business Desk
Gold and silver prices began the week on a weaker note, with investors turning cautious amid a firmer US dollar and signs of easing global tensions. The shift in sentiment follows a hawkish signal from the US Federal Reserve, which has indicated that further interest rate cuts may be limited for now—reducing the appeal of non-yielding assets such as gold.
On the Multi Commodity Exchange (MCX) in India, gold futures maturing on December 5, 2025, were trading at Rs 1,21,284 per 10 grams, down Rs 224 or 0.18% in early trade. The yellow metal opened at Rs 1,21,148 per 10 grams, compared to the previous close of Rs 1,21,508. By 8:53 a.m., total traded volume stood at 16,041 lots, indicating cautious activity among traders.
The latest correction comes after the US Federal Reserve’s decision last week to reduce its benchmark rate by 0.25%, bringing it within the 3.75%–4.00% range. While the rate cut initially supported risk assets, Fed Chair Jerome Powell’s hawkish remarks at the post-meeting press conference signalled that the central bank may pause further cuts for now.
Powell’s comments—emphasizing resilience in the US economy and a continuing focus on inflation—prompted traders to scale back expectations of aggressive easing. According to the CME FedWatch Tool, the probability of another cut in December has dropped to 71%, from over 90% before Powell’s statement.
Analysts say this shift in expectations has pushed the US dollar index higher, making gold more expensive for holders of other currencies. “A stronger dollar typically acts as a brake on gold prices,” said Rohit Sharma, a commodities analyst at Mumbai-based BullionTrack Research. “The Fed’s message that it won’t rush into further rate cuts has cooled speculative buying.”
Easing Global Tensions Also Weigh on Safe-Haven Demand
Apart from monetary cues, easing geopolitical tensions—particularly between the US and China—has contributed to the recent pullback. The two countries last week agreed to reduce select tariffs and increase bilateral cooperation in trade and technology. The move has eased investor anxiety and diverted capital toward equities and risk assets.
“Gold thrives on uncertainty,” said Shweta Joshi, senior economist at Axis Commodities. “As soon as the fear factor declines—whether that’s geopolitical conflict, inflation, or economic slowdown—investors rebalance portfolios away from safe havens.”
Silver prices mirrored gold’s trend, registering mild losses as industrial demand projections also moderated amid improving supply chain stability.
From Record Highs to a Market Correction
Despite Monday’s dip, gold has still delivered an impressive performance in 2025, gaining nearly 51% year-to-date. The metal hit an all-time high of $4,381.21 per ounce on October 20, driven by recession concerns, high global debt levels, and strong central bank buying. However, it has since corrected by over 10% as market sentiment improved.
Analysts view the current pullback as a natural correction after months of rallying. “After a record-setting surge, the market is consolidating,” said Ankit Gupta, head of commodities research at TradeVision India. “Investors are booking profits ahead of the December Fed meeting, and the strengthening dollar adds downward pressure.”
Outlook: Consolidation Phase Likely
Experts say the short-term trend for gold will depend heavily on the Federal Reserve’s communication, the trajectory of inflation data, and geopolitical developments. If inflation remains sticky or new global flashpoints emerge, gold could regain upward momentum. Conversely, sustained economic stability may lead to further profit-taking.
“Investors are recalibrating,” said Gupta. “The fundamental drivers of gold—monetary policy uncertainty, inflation, and global risks—remain, but their intensity has temporarily eased. Prices may consolidate before the next major move.”
For Indian investors, currency fluctuations and festive demand could offer additional volatility in the coming weeks. Analysts expect gold to trade in a narrow range until clearer signals emerge from global central banks.
As of now, bullion markets appear to be entering a phase of cautious consolidation—after one of the most dramatic rallies in recent history.
