Gold increased by 0.54% to Rs 130,462, bolstered by ongoing expectations of a rate cut from the Federal Reserve in December, as markets assign nearly a 90% likelihood to a 25-bps reduction. The recent release of softer economic data from the United States has bolstered a dovish perspective, while the speculation surrounding Kevin Hassett potentially succeeding Jerome Powell as the next chair of the Federal Reserve has further fueled optimism regarding rate cuts. Investors are currently anticipating the postponed September PCE report for additional insights. US Treasury yields experienced a slight decline in the wake of a global bond sell-off, which provided further support to bullion prices.
Central bank demand continued to serve as a robust foundation, with a net addition of 53 tonnes in October, marking the highest monthly increase since November 2024. Poland and Brazil spearheaded the purchases, whereas China continued its buying trend for the twelfth month in a row, increasing its reserves to 2,304 tonnes. Russia emerged as the sole significant seller, decreasing its production by 3 tonnes.
Nevertheless, elevated global prices exerted pressure on retail demand throughout Asia. In India, the purchasing activity during the wedding season has shown a subdued trend, with dealers providing discounts reaching as high as $18 per ounce. The elimination of VAT exemptions on gold purchases in China has subdued demand, resulting in a varied landscape of premiums and discounts.
In the interim, Singapore and Hong Kong experienced slight premiums within the physical market. From a technical perspective, gold is experiencing short covering, as evidenced by a 2.21% decline in open interest, bringing it to 13,011. Support is positioned at Rs 129,910, with additional downside potential extending to Rs 129,365. Conversely, resistance is identified at Rs 131,200, and a breakout could propel prices towards Rs 131,945.