Gold prices experienced a significant increase, closing 1.39% higher at Rs 142,257, as weaker-than-anticipated U.S. inflation figures bolstered the belief that the Federal Reserve might pursue a less aggressive approach to monetary policy. In June, U.S. consumer inflation moderated to 3.5% year-on-year, a decline from 4.2% in May. Meanwhile, core CPI held steady over the month, following a prior increase of 0.2%. The weaker inflation print led traders to reduce their expectations for a July rate hike, thereby bolstering precious metals amid a more subdued interest rate outlook.
Despite the favourable market response, the Federal Reserve indicated in its monetary policy report that inflationary pressures have intensified this spring, attributed to the cumulative effects of tariffs, elevated energy prices associated with geopolitical tensions, and strong investment in artificial intelligence. During the week ended July 7, COMEX gold speculators decreased their net long positions by 1,964 contracts, bringing the total to 114,854. This shift suggests a slight reduction in bullish sentiment among traders. HSBC has adjusted its long-term projections, reducing its average gold price estimates to $4,560 for 2026 and $4,925 for 2027. This revision is indicative of anticipated strength in the U.S. dollar and a comparatively tighter monetary policy environment. Physical bullion demand exhibited a varied landscape throughout Asia.
Gold experienced broader discounts in India due to heightened price volatility impacting purchasing interest, whereas demand in China continued to show resilience. The People’s Bank of China has continued its gold purchasing trend for the twentieth month in a row, augmenting its reserves by 480,000 ounces, which is approximately 15 metric tonnes, bringing the total to 75.44 million ounces. This marks the most significant monthly increase since October 2023. London vault holdings also increased marginally to 9,392 tonnes by the end of May.
Gold is currently experiencing a phase of short covering, evidenced by a 9.91% decline in open interest alongside a significant increase in prices. Immediate support is observed at Rs 140,905, succeeded by Rs 139,560. On the upside, resistance is positioned at Rs 143,395, and a decisive breakout above this level could pave the way towards Rs 144,540. The technical structure remains constructive as long as prices sustain above key support levels.