Gold prices declined ₹612 to ₹1,09,210 per 10 grams in domestic futures trade on Thursday as speculators cut positions following a firm recovery in the dollar after the U.S. Federal Reserve's cautious policy stance dampened bullion's rally.

On the Multi Commodity Exchange (MCX), gold futures for October delivery depreciated ₹612 or 0.56% to ₹1,09,210 per 10 grams.

The December contract also diminished ₹566 or 0.51% to ₹1,10,300 per 10 grams.

Silver prices weakened too. The white metal futures for December delivery slipped ₹604 or 0.48% to ₹1,26,380 per kilogram, while the March next year contract fell ₹630 or 0.49% to ₹1,27,985 per kg.

"The Federal Reserve announced its first 25 basis point rate cut of 2025, which aligned with market expectations. However, the policy stance for 2026 was less dovish, as markets are now anticipating only one potential rate cut next year.

"This shift in outlook weighed on bullion prices, which had rallied strongly in recent weeks on aggressive rate cut bets and increased geopolitical tensions," said Deveya Gaglani, Senior Research Analyst - Commodities, Axis Securities.

The Federal Reserve said on Wednesday that economic activity moderated in the first half of the year, job gains slowed, unemployment edged up, while inflation remained somewhat elevated.

"In light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-4.25%," the U.S. central bank added.

Commodities market experts noted the central bank has still signalled two more rate cuts this year, which could support gold in the medium term.

Globally, gold futures for December delivery dropped $28.05 or 0.75%nt to $3,689.75 per ounce after hitting a record $3,744 in the previous session.

Silver futures were down 1.05% at $41.71 per ounce, retreating from a 14-year high of $43.43 earlier this week.

Fed Chair Jerome Powell described the latest move as "risk management" amid labour market weakness, stressing there is no need to rush easing. However, newly appointed Governor Stephen Miran dissented, seeking a larger 50 basis points cut.

The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.35% to 97.21, further weighing on bullion prices.

"The dollar index hovered above 97 on Thursday after rebounding sharply in the prior session, as investors reassessed the Federal Reserve's policy outlook," said Jigar Trivedi, Senior Research Analyst at Reliance Securities.

Gold declines ₹612 on strong dollar, weak global cues after Fed move