Gold prices experienced a decline of 1.22%, concluding at Rs 142,402, as diminishing safe-haven demand coupled with resurfacing inflation concerns negatively impacted market sentiment. Despite the escalation of geopolitical tensions following renewed hostilities between the US and Iran in the Strait of Hormuz, both parties subsequently consented to halt additional military operations in anticipation of peace negotiations set to occur in Doha this week. Rising crude oil prices in the wake of the conflict have reignited concerns about inflation, thereby diminishing the attractiveness of non-yielding assets.
Meanwhile, US PCE inflation data broadly aligned with market expectations, leading investors to marginally lower their forecasts for further Federal Reserve rate hikes. Market participants are currently focused on the forthcoming US monthly employment report and ISM Manufacturing PMI for new insights into the Federal Reserve’s monetary policy trajectory. Physical gold demand exhibited a varied landscape across key Asian markets. India experienced gold trading at a premium for the first time in almost six weeks, driven by a recent price correction that stimulated buying interest, despite overall retail demand remaining lacklustre.
In contrast, Chinese bullion persisted in trading at discounts, even as the People’s Bank of China prolonged its gold reserve acquisitions for the nineteenth consecutive month. However, China’s net gold imports through Hong Kong experienced a significant decline during May. London vault holdings experienced a slight uptick, reaching 9,392 tonnes by the conclusion of May. The World Gold Council reported that global gold ETFs experienced net outflows of US$2 billion in May, which brought total assets under management down to US$604 billion. However, year-to-date inflows continue to show a strong positive trend, amounting to nearly US$17 billion.
Gold is currently experiencing renewed selling pressure, as evidenced by a 2.54% increase in open interest, which suggests the establishment of new short positions. Immediate support is identified at Rs 141,450, with additional weakness possibly extending towards Rs 140,490. On the upside, resistance is positioned at Rs 143,775, and a sustained breakout above this level could facilitate a movement towards Rs 145,140.