Gold does not pay interest, making it less attractive when bond yields and interest rates rise. Expectations of further Federal Reserve tightening can therefore weigh on prices, particularly if inflation remains persistent and the US dollar strengthens.
Vikas Gupta, smallcase manager and CEO of Omniscience Capital, said the prospect of higher inflation and interest rates alongside a sustained rise in gold prices presented a challenge for the market outlook.
While central banks could remain significant buyers, Gupta said selling by other investors could offset some of that demand and keep prices in check. He expects Indian gold prices to see a modest festive-season rise before stabilising, while global prices could remain under pressure amid the possibility of further Fed rate hikes.