Indian gold buyers get 'breathing room' from Fed before Diwali, but conditions apply

The US Federal Reserve’s decision to hold interest rates steady could give Indian gold buyers some breathing room, with prices likely to remain range-bound in the coming weeks. A sustained recovery, however, may depend on whether expectations of a December rate hike ease, even as festive demand picks up in India and geopolitical uncertainty keeps markets on edge.

The Fed held its benchmark interest rate in the 3.75%-4.00% range on Wednesday, as expected. Investors are now looking ahead to fresh inflation data and the central bank’s next policy decision for clues on the direction of borrowing costs.

“The pause could help gold settle into a broad range, giving consumers some breathing room, but we would distinguish between stabilisation and a fresh uptrend,” Anindya Banerjee, head of currency and commodity research at Kotak Neo, told ET Online.


Fed's policy announcement is a key near-term trigger for bullion. Its guidance on future interest rates could influence the US dollar and Treasury yields, both of which affect gold prices.

Gold remains under pressure below $4,120 an ounce in international markets and Rs 1,46,000 per 10 grams on the Multi Commodity Exchange (MCX), Banerjee said. Domestic buyers could find opportunities if prices approach Rs 1,40,000 per 10 grams, although the rupee’s movement against the dollar will determine how much of any global price decline is passed on to Indian consumers.

December rate outlook

The Fed’s decision has done little to change gold’s near-term direction because markets had already anticipated a pause, said Adarsh Diwe, research consultant at Metals Focus, which works with the World Gold Council as its primary external research provider.

“The probability of a rate hike in December stands at 78%, which continues to weigh on prices,” Diwe said.

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That expectation could limit gold’s recovery in the near term. Higher interest rates tend to make interest-bearing assets more attractive relative to gold, which does not offer a regular yield. If markets begin to see a lower likelihood of a December hike, however, bullion could find room to move higher.

Meanwhile, Indian prices are receiving some support from improving festive demand. Discounts on domestic gold narrowed to around $2 an ounce as buying picked up, bringing local prices closer to international levels, Diwe said.

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Festive demand picks up

Despite uncertainty over the global outlook, gold buying in India has shown signs of improvement over the past few days.

“Over the past five days, we have seen good buying across India and across sectors. This is a very positive signal that nobody was expecting. People are buying gold now during the festive season,” said Surendra Mehta, national secretary of the India Bullion & Jewellers Association (IBJA).

Geopolitical uncertainty

Mehta expects gold prices to remain range-bound until December, with the US elections and the Fed’s next policy decision among the key factors to watch.

The pickup in buying could help domestic prices hold closer to international levels, even if global bullion prices struggle to gain momentum. However, stronger festive demand does not necessarily mean prices will rise, particularly if international markets come under renewed pressure.

Beyond interest rates, developments in the Middle East could determine how gold performs in the coming weeks.

Nitin Kedia, national general secretary of the All India Jewellers & Goldsmith Federation (AIJGF), said geopolitical uncertainty could keep volatility elevated in the near term, with some relief possible in 2027.

Kedia also pointed to a reported proposal for direct talks with Iran, saying progress could ease tensions temporarily, although the situation in the Middle East could become more tense again after November 4.

Dollar and bond yields remain key risks

For investors, the outlook also depends on the interaction between US bond yields, the dollar and the rupee.

Paresh Bhagat, chairman of Mangal Keshav Financial Services, said the Fed’s cautious approach to inflation and the possibility of further rate hikes could keep gold prices under pressure in the near term.

Higher US bond yields and a stronger dollar raise the opportunity cost of holding gold, which does not pay interest, he said.

For Indian buyers, the rupee-dollar exchange rate is another important consideration. A weaker rupee can cushion the impact of falling international gold prices because it raises the cost of importing bullion. As a result, a decline in global prices may not translate into an equivalent reduction in domestic prices.

Bhagat expects gold to remain volatile in the near term, with US inflation data, bond yields and the dollar likely to determine its immediate direction. Over the longer term, however, geopolitical uncertainty, central-bank buying and safe-haven demand could continue to support the metal.

For consumers planning festive or wedding purchases, the outlook points to a market that may offer opportunities if prices ease towards key support levels, but not necessarily a sustained fall. Staggering purchases could help reduce the risk of buying the entire quantity during a volatile session, while the December Fed meeting remains a key event for the market to watch.