Gold prices fell by 1.07%, closing at Rs 146,529, influenced by a robust U.S. dollar, which reached a one-year peak in light of increasing anticipations regarding a more stringent monetary policy from the U.S. Federal Reserve. Market sentiment shifted to a bearish outlook following the indication from nearly half of Federal Reserve officials that at least one rate hike is anticipated this year. Concurrently, CME FedWatch data revealed a significant increase in the probability of a September rate hike, escalating to approximately 69% from 29% just a week prior. Investors are currently anticipating the U.S. Personal Consumption Expenditures inflation data to provide additional guidance on policy direction.
Despite the recent correction, major financial institutions maintain a structurally positive outlook on gold. Deutsche Bank anticipates that gold will attain a price of $4,800 per ounce in the fourth quarter, assuming a sustained pause by the Federal Reserve. Meanwhile, Goldman Sachs has adjusted its year-end projection to $4,900 per ounce, down from $5,400, highlighting immediate downside risks while still holding a positive medium-term perspective. Physical demand has continued to exhibit weakness across major consuming regions. India’s gold imports have decreased by nearly 70% following the rise in import duties to 15%.
Concurrently, Swiss gold exports to India fell to a six-year low of 955 kg in May. Domestic jewellery, bar and coin demand also remained lacklustre. India’s physically backed gold ETFs experienced their inaugural monthly outflow in a year during May, indicative of profit booking following the recent price rally. Globally, gold ETFs experienced net outflows amounting to $2 billion in May, yet year-to-date inflows are nearly $17 billion. Meanwhile, gold stored in London vaults experienced a slight uptick, reaching 9,392 tonnes by the end of May.
Technically, the market is experiencing renewed selling pressure, evidenced by a 0.55% increase in open interest to 9,337 contracts alongside a decline in prices. Gold encounters immediate support at Rs 145,660; a breach beneath this level is expected to challenge Rs 144,795. On the upside, resistance is observed at Rs 147,240, and a sustained movement above this threshold could propel prices toward Rs 147,955.