Reduced expectations of a U.S. Federal Reserve rate hike later this year helped gold prices rise by 0.11% to close at Rs 153,091. Market sentiment experienced an uptick following an interim U.S.–Iran peace agreement, which contributed to a reduction in geopolitical tensions and alleviated worries regarding energy-driven inflation. The agreement extends the existing ceasefire and facilitates the reopening of the Strait of Hormuz, thereby alleviating supply concerns in global energy markets. Lower oil prices have subsequently diminished inflationary pressures, prompting traders to reevaluate the probability of stricter monetary policy in the United States. The economic data emerging from the U.S. has also bolstered support for gold.
Housing starts experienced a notable decline of 15.4% in May, reaching an annualised rate of 1.177 million units. This marks the lowest level since May 2020 and falls considerably short of market expectations. The weaker housing data reinforced expectations that the Federal Reserve may adopt a more cautious approach. Market participants have decreased the likelihood of a December rate hike to 58%, a decline from almost 70% earlier, as focus continues to center on the forthcoming Federal Reserve policy decision under Chair Kevin Warsh. Physical gold demand exhibited varied trends among key consuming countries.
In India, the demand for jewellery saw a modest improvement as softer prices stimulated purchasing activity, despite the overall retail confidence continuing to be subdued. Chinese premiums have moderated, indicating a state of equilibrium in demand conditions. Meanwhile, global gold ETFs experienced net outflows of $2 billion in May, primarily influenced by trends in Asia and North America, although year-to-date inflows continue to show a robust positive trend. Central bank demand remains a significant factor in providing long-term support, as evidenced by a survey conducted by the World Gold Council, which indicates that 45% of reserve managers anticipate increasing their gold holdings in the coming year.
Technically, the market is experiencing short covering, as evidenced by a 0.84% decline in open interest alongside a rise in prices. Gold is maintaining its support level around Rs 152,445, with additional support identified at Rs 151,800. On the upside, resistance is observed at Rs 153,650, and a sustained move above this level could pave the way for a test of Rs 154,210.