Summary of this article
Cooling US inflation sparks expectations of Federal Reserve rate cuts.
Heightened West Asia tensions increase central bank physical gold demand.
Expanding green energy sector fuels record industrial silver fabrication demand.
Gold and silver gained in early trade on August 17, 2026. On the Multi Commodity Exchange (MCX, gold futures with October 5, 2026 expiry gained over 1 per cent to touch Rs 1,56,155 per 10 grams.
On the other hand, silver futures with September expiry inched higher by more than 1 per cent to Rs 2,38,479 per kilogram. Physical gold with 24 karat purity also gained 0.34 per cent to Rs 1,55,660 per 10 grams, while 22 karat purity gained 0.35 per cent to Rs 1,42,700 per 10 grams.
Why Are Gold and Silver Gaining?
The early gains seen in gold and silver prices are being supported by cooling inflation figures in the US, rising market expectations of Federal Reserve interest rate cuts, heightened geopolitical tensions in West Asia, and expanding industrial consumption for silver.
Softening US Inflation and Labour Data
The release of macroeconomic indicators from the US indicate that price pressures are easing. According to the US Bureau of Labor Statistics, the headline consumer price index (CPI) dropped to an annual rate of 3.40 per cent in July 2026.
Similarly, the producer price index (PPI) remained unchanged, alongside subdued wholesale figures, while initial jobless claims stabilised around 209,000, according to the United States Department of Labor. This signals a labour market which allows policymakers in the US room to unwind restrictive monetary measures.
Growing Expectations of Federal Reserve Rate Cuts
Slowing inflation has led market participants to adjust their monetary policy outlook. According to the CME FedWatch Tool, traders are currently assigning an implied 69.90 per cent probability that the US Fed will hold interest rates steady at their next meeting on September 16.
Notably, this is an increase from a 47.60 per cent chance a month ago, indicating that traders have postponed expectations of any rate hikes this year. Additionally, the benchmark 10 year US Treasury yield retreated toward 3.88 per cent, while the US Dollar Index dropped near the 102.50 level. A softer dollar and a stable interest rate expectation decrease the opportunity cost of holding non-yielding precious metals, such as gold and silver, making bullion more attractive for investors.
Kaynat Chainwala, AVP - Commodity Research at Kotak Securities, told Outlook Money that a softer US dollar and reduced Fed rate-hike expectations are the main drivers, following a run of soft July data including a surprise 23,000 nonfarm payroll decline and retail sales that fell against expectations.
Emphasising how this string of data has reinforced the case for the Federal Reserve to stay on hold through the year-end, she explained the direct impact on precious metals.
"Lower rate-hike odds reduce the opportunity cost of holding non-yielding metals, and that is what is supporting both gold and silver," Chainwala said.
Hareesh V, Head of Commodity Research at Geojit Investments Limited, told Outlook Money that gold and silver posted moderate gains today, supported primarily by a correction in the US dollar, which slipped below the 100 mark. Echoing the sentiment on interest rates, he highlighted how economic indicators are shaping market expectations.
"Additional support came from expectations that the U.S. Federal Reserve may maintain a softer monetary policy stance following weaker-than-expected economic data," Hareesh said.
Geopolitical Friction and Central Bank Buying
Recent instances of rising conflict in West Asia and the ongoing security challenges surrounding key shipping corridors have led to the rise in demand for physical gold. This demand is also being reinforced by institutional accumulation.
According to the World Gold Council (WGC), central bank net gold demand picked up significantly, reaching 289 tonnes in the second quarter alone. The report also noted that central bank net demand reached 345 tonnes in the first half of the year. Gold remains the primary hedge of choice for nations during periods of sustained cross border uncertainty.
While cooling inflation is a major factor, the ongoing standoff in West Asia could quickly revive hawkish Fed bets if it leads to renewed oil-driven inflation pressures.
"Two-way volatility looks more likely than a sustained one-way rally, and the key question for markets now is no longer simply whether inflation is cooling, but whether geopolitical risks can override that trend," Chainwala said.
Also bringing attention to these global tensions, Hareesh noted their direct impact on investment choices.
"Furthermore, ongoing geopolitical uncertainties across global markets increased demand for safe-haven assets, enhancing the appeal of precious metals," Hareesh said.
Expanding Industrial Demand for Silver
Apart from gold’s gains, silver is also benefiting from the precious metal investment flows and sustained industrial demand. According to The Silver Institute’s World Silver Survey, global industrial silver fabrication is projected to reach an all-time high of 710 million ounces this year. This surge is fuelled by a 20 per cent annual increase in demand from the solar photovoltaic and green energy sectors as reported by the same institute. The physical supply deficit provides a price floor for the white metal across global markets.
Future Trajectory for Gold Prices
Gold hit an all-time high of $5,589 an ounce in January, which remains roughly 21-22 per cent above current levels near $4,400. As markets navigate these mixed data points, analysts anticipate a slow and uneven climb supported by central bank buying rather than an immediate rush back to record levels.
"A retest in the next few months looks unlikely without a fresh, major catalyst, such as a decisive Fed pivot toward rate cuts, a durable de-escalation in the West Asia conflict, or a much steeper dollar decline," Chainwala said.
Adding to this perspective, Hareesh emphasised that while fundamentals remain favorable, a sharp acceleration in prices appears less likely given the strong rally witnessed in recent months.
"The near-term outlook for gold and silver remains mild positive, supported by favorable fundamentals, including expectations of a softer U.S. Fed policy, a weaker dollar, and persistent geopolitical uncertainties," Hareesh said.
Discussing whether gold could surpass its previous peak, he pointed out that the market may lack a strong catalyst for a fresh breakout.
"It is less likely for gold to surpass its record high in the coming months. Gold prices are more likely to trade in a choppy range with a mild positive bias," Hareesh said.
