Gold in a holding pattern? Why investors should watch Fed rates, not China

If you’ve been wondering whether it’s time to buy gold, Emkay Wealth Management’s latest Navigator report offers a subtle yet important cue: gold may be taking a breather before its next sprint.

 

In their July outlook, the firm notes that global gold prices are currently in a consolidation phase—a technical holding pattern that often precedes a strong upward move. For Indian investors tracking global cues, this isn’t just a charting insight—it could influence how and when you increase exposure to the yellow metal.

 

Historically, gold has had a love-hate relationship with interest rates. When US rates rise, gold struggles. When they fall, gold shines. Right now, markets are in limbo—the Federal Reserve is on pause, weighing the inflationary impact of new US tariffs.

 

 

But there’s a growing consensus that a rate cut may be on the cards by year-end, given softening inflation and sluggish retail demand. If and when that happens, gold could break out of its current range. Emkay cites technical support at US$ 3,297 and US$ 3,248, suggesting any short-term dip may offer long-term opportunity.

 

Equally important is the Dollar Index, which has slipped nearly 10% since January. A weaker dollar makes gold more attractive globally, especially to emerging-market buyers, as it becomes cheaper in local currency terms.

 

“The likely path for gold is upward, but it’s contingent on US rate action and dollar weakness,” Emkay Wealth notes.

 

What about China’s demand? It’s no longer the main story

Until recently, China’s central bank buying spree was one of the dominant bullish triggers for gold. But with selling reported in April and May, that factor has faded. In other words, the rally ahead won’t be China-led—it’ll be dollar and Fed-led.

 

For Indian investors, this is significant. Much of the local appetite for gold—whether through sovereign gold bonds, ETFs, or physical bullion—is influenced by international pricing, even if rupee-dollar dynamics and duties affect final prices.

 

"The Dollar index is at 97.00 and this marks a fall of close to 10 % over the last six months, and a fall of about 10 % since the beginning of this calendar year. This has been already priced in the gold prices in the international markets, but what we need to see is a further fall in the Dollar caused by official rate cuts and a fall in market yields. There is a strong view that with the new budgeted spends to the tune of US$ 4.60 trillion, the situation could become murkier because the resultant borrowings may put upward pressure on the

yields," said Emkay in a note. 

 

What should retail investors do?

If you’re holding gold, now is not the time to exit in a hurry. If you’re looking to enter, start gradually. Dollar-cost averaging through gold ETFs or SGBs may help you ride out short-term volatility while staying positioned for long-term upside.

 

Here’s what to keep in mind:

 

• Stay diversified: Don’t let gold exceed 10–15% of your overall portfolio.
• Track the Fed: A rate cut in the US is your green signal.
• Watch the dollar: A sustained dip below 96 on the Dollar Index could be your confirmation.