MCX gold prices drifted lower throughout this week, giving up twice the gains recorded in the second week of September, as traders scaled back their bullion bets following hawkish signals from US Federal Reserve officials, higher US Treasury yields and rising global inflationary pressures.
MCX gold for October delivery closed lower in each of the last four trading sessions, causing it to drop ₹3,500 per 10 grams for the week, falling to ₹1,50,891. The losses were more than double the ₹1,597 gain recorded in the previous week. The weakness also turned September's gains into losses, marking a stark reversal from the strong gains in August.
The biggest challenge for the yellow metal has been rising bond yields, driven by elevated crude oil prices, raising fresh fears that the US Federal Reserve could further tighten interest rates. In Thursday's trade, the US 10-year yield reached the highest level in 19 years, while the 30-year Treasury yield hit the highest since 2004.
Investors are demanding greater compensation to hold bonds as concerns about persistent inflation, government spending, and surging corporate borrowing to finance the artificial intelligence buildout intensify. Fed Governor Michael Barr said in a speech this week that further rate hikes “are likely to be needed” to bring inflation back to the Fed’s 2% target.
Williams said the Fed is done with explicit forward guidance, adding that policymakers will instead assess incoming economic data before deciding on future policy moves. US inflation has remained stubbornly high, prompting the Federal Reserve to raise its short-term interest rate last week for the first time in three years.
Gold is traditionally considered an inflation hedge and a safe investment during geopolitical uncertainty. However, higher interest rates tarnish its attractiveness as investors turn to yield-bearing assets. Negotiators in New York are exploring a phased path out of war that would involve Tehran reopening the Strait of Hormuz and Washington lifting its economic blockade of Iran, Reuters reported citing sources.
Following this development, crude oil prices retreated modestly but were on track for weekly gains. Will MCX gold prices go back to ₹1.60 lakh levels? Brokerage firm ICICI Global Markets expects domestic gold prices to remain largely driven by developments in the global gold market, with movements in the INR providing an additional source of volatility.
Physical demand should receive some support as the festive and wedding season progresses. Consequently, the brokerage retained its view that local gold prices are likely to trade in the ₹1,40,000 to ₹1,60,000 per ten grams range over the remainder of 2026.
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.