Summary of this article
Gold has fallen nearly 9 per cent from its August peak amid rising yields
Fed rate-hike bets and a stronger dollar could keep gold prices under pressure
Experts recommend staggered buying instead of investing a lump sum at once
Gold prices have corrected sharply from their recent peak, as higher US bond yields, a stronger dollar and rising expectations of a US Federal Reserve rate hike weigh on the yellow metal. MCX gold futures were trading at Rs 1,50,390 per 10 grams as at 4:00 PM on September 2, 2026, down 0.88 per cent from the previous close. The contract has fallen nearly 9 per cent from its recent peak of Rs 1,64,773 recorded on August 24, 2026.
Rising tensions in West Asia have pushed crude oil prices higher, raising fears of higher inflation. That has, in turn, strengthened expectations that the US Federal Reserve may raise interest rates at its September 15-16 meeting.
The World Gold Council (WGC), in its latest weekly markets monitor, said: “The US and Iran traded strikes for the first time in roughly a month, breaking the prior calm and pushing oil prices higher. This renewed friction remains a key variable for markets, directly shaping inflation expectations and the Federal Reserve's rate trajectory.”
Expectations shifted dramatically after Fed Chair Kevin Warsh’s first major Jackson Hole speech earlier this week. Warsh said the Fed still has work to do if underlying inflation fails to move towards its 2 per cent target at a sufficient pace. He also said financial conditions did not appear restrictive enough.
His comments prompted traders to reassess the chances of a September rate hike. According to the CME FedWatch Tool, markets are now pricing in around a 68 per cent probability of a rate hike this month, up from about 35 per cent a week ago.
Higher interest rates are generally negative for gold, because the metal does not generate interest income. When bond yields rise, investors have a greater incentive to hold interest-bearing assets instead of gold.
The US 10-year Treasury yield has climbed to 4.81 per cent, while the US Dollar Index was quoting at 99.86. A stronger dollar also tends to weigh on gold because the metal is priced in the US currency, making it more expensive for holders of other currencies.
The market is now waiting for more clarity from US economic data. The August non-farm payrolls report, due on September 4, will be closely watched for clues about the health of the US labour market and the US Fed's next move.
What About PM Modi's Austerity Appeal
Prime Minister Narendra Modi has again made calls for austerity, appealing to citizens to avoid buying gold unless it is necessary, as part of a broader push to conserve foreign exchange and promote domestic consumption.
In an Instagram video posted on September 1, Modi also urged citizens to avoid foreign holidays and overseas weddings and to favour Indian goods and services.
Gurmeet Singh Chawla, managing director at Master Portfolio Services, said the appeal should primarily be viewed in the context of reducing India’s gold imports and conserving foreign exchange. It does not fundamentally change gold’s role as a portfolio diversifier or hedge against currency, geopolitical and macroeconomic risks. Further, a weaker rupee can cushion the impact of a fall in international gold prices because imported gold becomes more expensive in rupee terms. This means Indian gold prices may not always mirror the movement in international gold prices one-for-one.
Should Investors Buy Gold After The Correction
Gold’s sharp correction has brought the yellow metal back into focus for investors, who are now weighing whether to accumulate at current levels or wait for prices to fall further. Chawla said a Fed rate hike would likely be negative for gold in the near term.
“A rate hike by the Fed would likely be negative for gold in the near term. Gold does not pay interest income and higher policy rates and bond yields increase the opportunity cost of holding the metal,” Chawla added.
He also said rising dollar could also add pressure. “Gold is priced in dollars, so a stronger dollar can put another level of pressure on it,” he said. However, he does not believe one potential rate hike necessarily marks the end of the broader gold bull cycle.
“A single rate hike doesn’t mean the end of the gold bull cycle,” Chawla said.
Gold’s outlook is also not determined by interest rates alone. Higher rates can increase recession risks and raise concerns about fiscal stability and financial-market volatility. If these risks worsen, investors may turn to gold as a safe-haven asset.
For investors who have no allocation to gold, Chawla believes the recent correction can be used to start accumulating rather than waiting for a perfect bottom. “For investors with no existing gold allocation, the recent correction provides an opportunity to start accumulating gradually rather than waiting indefinitely for a perfect bottom,” he said.
However, he cautioned against putting the entire investment into gold at one level because the metal could remain volatile as expectations around Fed policy change. “A staggered approach would allow investors to get involved if gold steadies but retain the liquidity to add to positions on deeper pullbacks,” Chawla said.
Chawla recommends spreading a large investment over several months instead of deploying it in one go. “Honestly, if you have got Rs 5 lakh to put into gold, don’t dump it all in one go. Spread it out over the next 3-6 months instead, kind of like a systematic investment plan (SIP),” he said.
This approach, he said, can reduce exposure to sudden price swings, while also offering the long-term upside that gold offers. Further, it will also reduce the stress of trying to guess exactly when prices will bottom out, he added.
What Should Investors Watch Over The Next Six Months
The direction of US monetary policy will remain one of the biggest drivers of gold prices. According to Chawla, investors should closely track US inflation and employment data, Treasury yields and the dollar. A sustained rise in real yields and a stronger dollar could keep gold under pressure, while a shift towards a more accommodative Fed stance could support the metal.
Geopolitical tensions, central bank buying and exchange traded fund (ETF) flows will also remain important as ongoing safe haven demand and buying by official institutions can help underpin prices, he said.
“The movement of rupee against the US dollar also matters for Indian investors as a weak rupee can offset the impact of fall in global gold prices,” he added.
