Gold prices are facing strong headwinds, with the near-term outlook turning increasingly bearish as the US Federal Reserve's monetary policy stance hardens, according to Vedika Narvekar, Research Analyst - Commodities & Currencies at Anand Rathi Shares and Stock Brokers. The precious metal briefly rebounded following the interim US-Iran peace agreement but has since fallen back, now trading around $4,090 per ounce on the spot market, a decline of nearly 7.5% from its recent peak.
Federal Reserve Policy and Dollar Strength
The primary driver of the current sell-off is the market's repricing of US interest rate expectations. According to CME FedWatch data, the probability of a 25-basis-point rate hike in July has surged to over 36%, up sharply from 8.5% just a week earlier. Expectations for additional tightening by year-end have also increased. This hawkish shift has lifted the US dollar index to its strongest level since May 2025, putting downward pressure on gold. Rising Treasury yields further erode the appeal of non-yielding bullion.
Geopolitical and Macro Factors
Mixed signals from the Middle East continue to add volatility, though the US-Iran peace agreement provided a temporary relief rally. Meanwhile, firmer Eurozone economic data, weaker Chinese growth indicators, and higher inflation readings in Japan have contributed to a complex macro backdrop, according to the report.
Demand Side: India, ETFs, and Central Banks
In India, physical gold demand remained subdued as seasonal weakness dampened jewellery purchases. Bar, coin, and digital gold buying also moderated. Gold imports cooled following a duty hike but remained higher on a year-on-year basis. Investment demand softened: Indian gold ETFs recorded record outflows in May amid profit-taking, although inflows resumed in June. Globally, ETF holdings continued to see net outflows, while central bank purchases slowed after a strong buying phase earlier in the year, reducing a key support for bullion prices.
Technical Levels and Near-Term Outlook
Gold remains vulnerable to testing the key $4,000 per ounce support level and may slide further as markets price in a more restrictive US monetary policy. The report provides the following technical levels:
| Level | International Gold ($/oz) | International Silver ($/oz) | Indian Gold (₹/10g) | Indian Silver (₹/kg) |
|---|---|---|---|---|
| Current Market Price | $4,090 | $61.90 | Not specified | Not specified |
| Support | $4,000 / $3,850 | $60 / $58.50 | ₹1,42,400 / ₹1,37,000 | ₹2,27,800 / ₹2,17,000 |
| Resistance | $4,300 / $4,380 | $72.50 / $76.50 | ₹1,52,900 / ₹1,55,800 | ₹2,56,250 / ₹2,72,800 |
"While some institutions still project prices could rise toward $4,800 per ounce in late 2026 under a prolonged pause in interest rates, a more aggressive tightening cycle involving three to four additional rate hikes could see gold retreat toward $3,800 per ounce." — Vedika Narvekar, as reported by Business Today.
The near-term bias remains cautious to bearish, with key drivers being the direction of US interest rates, dollar strength, ETF flows, and central bank demand.
For commodity traders and analysts, the immediate focus is on the $4,000 support level. A break below could accelerate selling toward $3,850 and eventually $3,800 if the Fed delivers multiple rate hikes. Conversely, any dovish pivot or renewed geopolitical tensions could trigger a bounce, but resistance at $4,300 and $4,380 caps upside in the near term.
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