Gold, Silver, and Bitcoin Rally Faces Fed Rate Hike Headwinds

Precious metals like gold and silver have seen a strong run in the last month, but their rally has hit a roadblock amid expectations of a US Federal Reserve rate hike.

Gold prices are up 7.6 per cent in a month and silver 6 per cent as of September 3, according to spot market data available on MCX. Meanwhile, Bitcoin has rallied 26 per cent during the same period, reclaiming the $80,000 mark.

Historically, these alternative assets have been vulnerable to a hawkish Fed stance because higher interest rates typically push yields and the dollar index higher, increasing the opportunity cost of holding non-yielding assets. However, experts say it might not hold this time amid an uncertain global environment, rising demand for other stores of value, and a likely risk of dollar debasement due to a rate hike.

Manav Modi, commodities analyst at Motilal Oswal Financial Services, said that underlying demand remains supportive. Still, a hawkish Fed could remain an important resistance factor for both gold and silver in the near-term.