Gold price prediction: Why Federal Reserve rates, not China could pump up the yellow metal

International gold prices are likely to rise after consolidating for some time, says Emkay Wealth Management Ltd., the wealth management division of Emkay Global Financial Services. In its latest Navigator report, the brokerage said that such a phase often sets the stage for an upward trend in gold prices. Earlier in the year, demand from China played a significant role in supporting higher gold prices. However, recent sell-offs by China have reduced its influence on the market. Over the past two weeks, a stable US dollar and increasing US bond yields have exerted downward pressure on gold prices.

Emkay Wealth Management elaborates on two critical factors influencing the market focus. “Emkay Wealth Management has cited that the current focus of the markets is on two factors, The first is the direction of US interest rates,” the report highlights. The Federal Reserve has maintained its interest rates steady due to uncertainty over tariff impacts on US retail prices. However, the prevailing economic conditions and lower inflation numbers suggest a strong likelihood of rate cuts before the year’s end. These potential cuts may trigger changes in gold price trends.

The second factor involves the anticipated decline of the US Dollar against major global currencies, which is contingent upon a persistent decrease in US Dollar yields and interest rates. Currently, the Dollar index is at 97, reflecting a decline of approximately 10% over the past six months. This drop has already been factored into international gold prices. 

Looking ahead, the market is closely monitoring potential US budget expenditures estimated at US$ 4.60 trillion. Such spending could complicate the situation by potentially driving up yields due to increased borrowing. This could lead to further complexities in the financial landscape, influencing gold prices.

Overall, the interplay between US monetary policy and currency movements remains crucial for gold price trajectories, as market participants await further developments in these areas. The evolving dynamics present a complex scenario for investors, highlighting the importance of strategic planning in navigating the market.