Gold prices experienced a significant decline of 3.62%, concluding at Rs 1,39,260. However, the losses were somewhat mitigated following reports that President Donald Trump postponed possible military actions against Iran, referencing ongoing negotiations. Despite this temporary reprieve, gold continued its decline for the ninth consecutive session, reaching its lowest point since early January. The overarching weakness is attributed to the ascent in oil prices, which intensifies inflation apprehensions, leading markets to recalibrate their forecasts regarding rate reductions and even to incorporate the likelihood of a potential rate increase by the US Federal Reserve in the upcoming months.
In light of recent developments, central banks have adopted a more cautious stance, with policymakers indicating that interest rates are likely to stay elevated until there are unmistakable signs of inflation subsiding. Fed Chair Jerome Powell acknowledged that discussions regarding rate hikes have emerged, reinforcing a hawkish outlook. Simultaneously, there are apprehensions that certain economies might divest gold reserves to mitigate the economic repercussions of the current conflict.
In the physical market, Indian gold discounts experienced a slight narrowing from the multi-year highs observed last week, bolstered by festive demand and a price correction, although overall buying interest continued to be subdued. Conversely, premiums in China have exhibited a decline, indicative of diminished demand. Central bank buying has decelerated, with net purchases recorded at merely 5 tonnes in January; however, the long-term accumulation trends continue to hold steady.
From a technical perspective, the market is experiencing long liquidation, as evidenced by a 16.36% decline in open interest, bringing it down to 5,012. Gold is currently experiencing support at Rs 1,31,800, with potential further decline towards Rs 1,24,345. Resistance is identified at Rs 1,44,505, and a breach of this level may propel prices towards Rs 1,49,755.