Gold, Silver, and Crypto Face Rate Hike Headwinds Amid Strong Demand

The recent rally in gold and crypto assets has run into a roadblock due to expectations of a US Federal Reserve rate hike. According to the CME FedWatch tool, market participants are pricing in a 58% chance of a hike, up from 45% last month.

Gold prices have surged 7.6% in a month, while silver has risen 6%. Bitcoin, on the other hand, has rallied 26% to reclaim the $80,000 mark. Historically, these alternative assets have been vulnerable to a hawkish Fed stance, as higher interest rates typically push yields and the dollar index higher.

However, analysts suggest that this time may be different due to an uncertain global environment, rising demand for other stores of value, and a potential risk of dollar debasement. Manav Modi, commodities analyst at Motilal Oswal Financial Services, notes that underlying demand remains supportive but a hawkish Fed could remain an important resistance factor.

Central-bank demand remains strong, particularly from China, with reported purchases totalling around 130 tonnes of gold as of July this year. Geopolitical uncertainty continues to support gold, and the stable dollar index has not instilled confidence among investors, increasing attention towards ancient and new-age currencies.