Gold prices retreat after US Fed rate cut but outlook remains bullish

Gold prices edged lower on Thursday (September 18) as the US dollar strengthened following the Federal Reserve’s widely anticipated rate cut and cautious forward guidance. Spot gold fell 0.1% to $3,655.10 per ounce, while US December gold futures slipped 0.8% to $3,689.80 an ounce.

In India, gold prices dropped ₹574, or 0.52%, to trade at ₹1.09 lakh per 10 grams, according to Goodreturns.

Fed rate cut and dollar strength

The US Federal Reserve lowered interest rates by 25 basis points to 4.00–4.25% and indicated a measured approach to further easing. While the move was widely expected, the Fed’s cautious tone suggested it will cut rates gradually, supporting a stronger dollar.

“The general message from the Fed was slightly hawkish on interest rates,” said Edward Meir, analyst at Marex. “We saw the dollar firm up after the Fed meeting, and Treasury yields moved higher. Over the short term, gold may retrace further, possibly to $3,600 an ounce.”

The dollar gained 0.3% against major currencies, making gold more expensive for overseas buyers, which contributed to the dip in prices.

Domestic market dynamics

India’s gold market mirrored the international trend, though demand remains supported by seasonal factors.

Aksha Kamboj, Vice President of the India Bullion & Jewellers Association, noted, “Gold has gained a new tailwind from the Fed’s rate cut. Unless the rupee weakens sharply or central banks turn unexpectedly hawkish, gold is expected to remain at elevated levels. Jewellery demand will stay robust, with shoppers favoring lighter, value-effective designs.”

Colin Shah, MD of Kama Jewelry, added that the Fed’s move provides relief to India’s gems and jewellery exports to the US, while domestic gold prices may continue to rise:

“Gold prices could hover in the range of ₹1.10 lakh to 1.12 lakh per 10 grams, and international prices are expected between $3,600–3,700 per ounce in the near term," Shah said.

Technical pullback and ETF trends

After hitting a record high of $3,707.40 an ounce on Wednesday (September 17), gold prices saw a mild profit-taking phase.

SPDR Gold Trust, the world’s largest gold-backed ETF, reported a decline in holdings from 979.95 tonnes to 975.66 tonnes.

Darshan Desai, CEO of Aspect Bullion & Refinery, highlighted, “The easing from record highs reflects a classic ‘sell-the-news’ reaction. Any pullback is likely to attract renewed buying, given ongoing geopolitical tensions, a weaker US dollar, and persistent economic uncertainties.”

-With Reuters inputs