Gold vs silver: How Fed rate hike, dollar and geopolitical risks affect prices

Gold and silver were trading in different directions on Friday (September 18) as markets continued to assess the impact of the US Federal Reserve's 25-basis-point rate hike and its guidance on the future path of interest rates.

COMEX gold was at $4,388.20 an ounce, down 0.26%, while COMEX silver was at $66.215 an ounce, up 0.18%, according to the latest available prices at on September 18.

The mixed move comes after a volatile session for precious metals following the Fed's decision to raise its benchmark rate by 25 basis points. Higher US interest rates and Treasury yields generally weigh on non-yielding assets such as gold and silver, while a stronger US dollar can also make dollar-denominated bullion more expensive for overseas buyers.

Why gold remains sensitive to Fed policy

Ruchit Thakur, Market Analyst at VT Markets, said the Fed's rate hike to 4% and its focus on elevated inflation and resilient economic activity support the US dollar and Treasury yields in the near term. This, in turn, can put pressure on gold and silver because higher yields increase the opportunity cost of holding assets that do not generate interest.

Thakur noted that gold fell more than 1% and silver around 1.7% immediately after the Fed decision. However, he also pointed to the other side of the equation: continued uncertainty around growth, trade, fiscal policy and geopolitics can support safe-haven demand for precious metals.

Vedika Narvekar, Research Analyst - Commodities & Currencies at Anand Rathi Share and Stock Brokers, said gold's recovery on September 17 was largely linked to a cooling in bond yields after their sharp rise following the Fed decision, rather than a change in gold-specific fundamentals.

According to Narvekar, the Fed's median rate outlook for end-2026 moved up to 4.1% from 3.8%, indicating that markets may have to factor in the possibility of further rate increases. She therefore expects gold to remain within a broad range, with elevated yields and a firmer dollar limiting sustained upside in the near term.

What is supporting bullion

Geopolitical uncertainty remains an important counterweight to the pressure from higher rates. Thakur said uncertainty over growth, trade, fiscal policy and geopolitical tensions could weaken confidence in risk assets and increase demand for safe-haven assets such as gold.

Oil prices are another factor markets are watching. Brent crude was around $103.77 a barrel,

while WTI was near $100.88 early Friday (September 18), with both benchmarks down about 1%. Reuters reported that expectations of alternative ways to move Saudi crude were offsetting some concerns over supply disruptions amid continuing tensions in the West Asia.

For gold, persistent geopolitical risks can support demand for the metal as a store of value even when higher rates are creating pressure.

Colin Shah, MD of Kama Jewelry, said the Fed's higher-for-longer stance could create near-term headwinds for gold by supporting the dollar and increasing the opportunity cost of holding non-yielding assets. However, he said elevated inflation expectations and geopolitical uncertainties continue to support gold's role as a store of value and hedge against macroeconomic and geopolitical risks.

What it means for Indian gold prices

Domestic gold prices are also influenced by the rupee-dollar exchange rate because India imports most of its bullion. A weaker rupee can raise the domestic price of gold even when international prices are under pressure.

Vikram Subburaj, CEO of Giottus.com, highlighted this divergence on September 17. While overseas spot gold had fallen after the Fed decision, MCX gold for October delivery traded at ₹1.52 lakh per 10 grams, up 1.29%, while December silver was at ₹2.35 lakh per kg, up 1.27%.

Saumil Gandhi, Senior Analyst - Commodities at HDFC Securities, attributed the decline in domestic gold partly to weak demand and overnight weakness in international markets.

Gold vs silver: Why their moves can differ

Gold tends to be more closely associated with monetary policy, real yields, currencies and safe-haven demand. Silver, while also treated as a precious metal, has a larger industrial-use component. Its price can therefore respond to both investment demand and expectations for industrial activity.

That means a hawkish Fed can put pressure on both metals through higher yields and a stronger dollar, while geopolitical uncertainty and changes in industrial-demand expectations can push them in different directions.

For Indian investors, the international price of gold and silver, the rupee-dollar exchange rate and domestic demand conditions therefore need to be considered together rather than looking at global bullion prices alone.

-With agencies inputs