Gold prices experienced a notable decline of 1.51%, closing at Rs 152,443. This drop was influenced by a widespread market sell-off and growing anticipations regarding a potential increase in interest rates by the U.S. Federal Reserve later this year. Sentiment also weakened after indications of diminishing geopolitical tensions in the Middle East, as Iran and Israel suggested a cessation of hostilities following an appeal from U.S. President Donald Trump. This development contributed to a decline in crude oil prices and a reduction in safe-haven demand for gold.
Investor focus has now turned to critical U.S. inflation metrics, notably the Consumer Price Index and Producer Price Index, which are anticipated to offer additional guidance on monetary policy. In light of the stronger-than-anticipated employment data from the U.S., market participants are now assigning a considerable likelihood to a Federal Reserve rate increase by December. Comments from Federal Reserve officials underscored apprehensions regarding enduring inflation, thereby bolstering expectations that policy may continue to be restrictive.
On the demand front, China’s central bank has continued its gold acquisition for the 19th consecutive month, resulting in reserves increasing to 74.96 million fine troy ounces as of May. However, physical gold demand remained subdued across significant Asian markets. Indian buyers predominantly refrained from active participation amid fluctuating prices, whereas Chinese premiums experienced a minor decline. India’s physically backed gold ETFs experienced their inaugural monthly outflow in a year as investors capitalised on profits, while global gold ETFs faced net outflows of $2 billion in May, primarily driven by withdrawals from Asia and North America.
Technically, the market is experiencing renewed selling pressure, as evidenced by a 4.53% increase in open interest to 8,980 lots, which suggests the formation of new short positions. Gold exhibits immediate support at Rs 151,120, with additional downside potential extending towards Rs 149,795. On the upside, resistance is observed at Rs 154,610, and a sustained move above this level could initiate a recovery towards Rs 156,775.