Gold prices experienced a significant decline of 1.41%, closing at Rs 147,203, influenced by the strengthening of the U.S. dollar and the Federal Reserve’s hawkish position. The Fed maintained interest rates at 3.50%-3.75%, yet revised projections indicated that nine policymakers continue to anticipate a rate increase within this year. Market expectations for a September rate increase have escalated to approximately 70%, diminishing the attractiveness of non-yielding assets like gold. Additional pressure emerged from the alleviation of geopolitical concerns following the uncertainty surrounding U.S.-Iran negotiations.
Goldman Sachs has revised its December gold price forecast downwards to $4,900 per ounce from $5,400, highlighting near-term downside risks while still upholding a positive long-term outlook. Physical demand has continued to exhibit a subdued trend across major consuming regions. In India, gold imports experienced a significant decline of nearly 70% following an increase in import duties to 15% from the previous rate of 6%. Concurrently, dealers have been providing discounts reaching up to $54 per ounce, which is broader than the $35 discount observed in the prior week.
India’s physically backed gold ETFs experienced their first monthly net outflow in a year during May, attributed to profit booking. In China, bullion transitioned to discounts of $4-$8 per ounce, contrasting with the premiums observed the previous week, as buyers exhibited a cautious stance. Globally, sentiment towards gold ETFs has diminished, evidenced by net outflows amounting to $2 billion in May. This has led to a 2% decrease in total assets under management, bringing the figure down to $604 billion, while holdings have contracted by 0.4% to 4,121 tonnes. Meanwhile, gold held in London vaults increased by 0.21% month-on-month, reaching a total of 9,392 tonnes.
As open interest rose 2.93% to 9,348 contracts as prices fell, suggesting the formation of new short positions, the market is technically still under additional selling pressure. Gold has immediate support at Rs 145,825, with a break below potentially extending losses toward Rs 144,450. On the upside, resistance is placed at Rs 148,460, and a sustained move above this level could trigger a recovery toward Rs 149,720.