Gold At Rs 1.43 Lakh, Silver At Rs 1.94 Lakh: Three Ways How The Fed Rate Decision Could Move Them

Gold and silver prices are trading lower on the Multi Commodity Exchange as investors wait for the US Federal Reserve's policy decision, due at 11:30 pm IST on Wednesday.

As of 9:16 pm, MCX gold for December delivery was at Rs 1,43,831 per 10 grams, down Rs 307 or 0.21%. December silver futures stood at Rs 1,94,650 per kg, lower by Rs 2,067 or 1.05%. In the international market, spot gold was at $4,042.70 an ounce, down 0.41%, while spot silver slipped 1.35% to $53.56.

The rate decision itself is unlikely to surprise anyone. The Fed raised its benchmark rate to 3.75–4.00% in September, its first increase in three years, and futures markets see more than a 90% chance that it stays there tonight. What could move bullion is the message that comes with the decision, and whether the Fed keeps another rate hike in December firmly on the table. Traders currently put the odds of a December hike at roughly 76% to 84%.

That makes the policy statement, and Fed Chair Kevin Warsh's press conference at midnight IST, the real event for gold and silver.

Here's a look at three scenarios how the precious metals may react to the Federal Open Market Committee (FOMC) meeting outcome.

Scenario 1: A Hold With A Hawkish Tone

This is the outcome most economists expect. The Fed would leave rates unchanged but stress that inflation remains too high, pointing to elevated energy prices, and signal that it is prepared to raise rates again in December.

Such a signal would likely lift the dollar and US bond yields and keep bullion under pressure. Anuj Gupta, an independent research analyst, told Business Today earlier on Wednesday that he sees support for international gold at $4,020 and then $3,980 an ounce, and for MCX gold at Rs 1,43,500 per 10 grams.

Ajay Kedia, director at Kedia Advisory, in comments carried by Business Standard on Wednesday morning, placed MCX gold support at Rs 1,42,740, followed by Rs 1,41,340. For silver, Gupta sees support at $52 an ounce internationally and Rs 1,92,000 per kg on MCX, while Kedia marks Rs 1,93,030 as the first support on MCX.

The fall may be limited, though. A hawkish hold is largely what the market has already priced in, and both metals have already drifted lower through the day in anticipation.

Scenario 2: A Softer Hold

Gold and silver could rebound if the Fed holds rates without committing to another increase. The signs to watch for are softer language on future tightening in the policy statement, or Warsh describing the oil-driven rise in prices as temporary or voicing concern about the job market.

That would reduce the odds of a December hike, ease the dollar and bond yields, and could prompt traders who have bet on lower prices to buy back their positions. Gupta sees resistance for international gold at $4,070 and then $4,100, and for MCX gold at Rs 1,46,000. Kedia placed MCX gold resistance at Rs 1,44,900 and says a sustained move above that level could take prices towards Rs 1,45,670.

Silver, having fallen harder, could also bounce harder. Gupta puts its resistance at $56 an ounce globally and Rs 2,03,000 per kg on MCX, while Kedia sees resistance at Rs 1,98,900, with Rs 2,01,080 as the next level if that is crossed.

Any rally may struggle to hold if crude oil keeps climbing. MCX crude oil futures were up nearly 3% on Wednesday, and rising energy costs keep inflation worries alive.

Scenario 3: A Surprise Rate Hike

A second straight increase, taking the rate to 4.00–4.25%, is the least likely outcome, with markets assigning it odds of only about 7%. It would, however, trigger the biggest reaction of the three.

Because investors are not positioned for a hike, the dollar and yields would likely jump and selling in precious metals could be swift. Spot gold could slip below the psychologically important $4,000 mark, which in turn may push MCX gold lower. Gupta reportedly said that a sustained break below Rs 1,43,000 could open the way to Rs 1,42,000 and then Rs 1,40,000. Kedia expects a break below Rs 1,42,740 to drag gold towards Rs 1,41,340, and a break below Rs 1,93,030 in silver to take it towards Rs 1,89,340.

For Indian buyers, the timing of Fed decision matters. With Dhanteras next week, the direction gold and silver take over the next 48 hours will shape what households pay during the festive season.