Gold prices increased by 0.09% to close at Rs 142,531, buoyed by short covering following recent declines. The market experienced continued pressure due to expectations that the U.S. Federal Reserve may persist in raising interest rates to manage ongoing inflationary pressures. Market participants are currently factoring in three rate hikes this year, with an approximate 64% probability assigned to an increase in September. Investors are currently concentrating on the forthcoming U.S. ADP employment report and nonfarm payrolls data, anticipated to offer additional insight into the Federal Reserve’s policy trajectory.
Geopolitical developments continued to capture attention as optimism for renewed U.S.-Iran diplomacy diminished following Iran’s denial of reports regarding planned discussions. Meanwhile, U.S. housing data exhibited mixed signals, as single-family home prices experienced a decline of 0.1% in April. In contrast, the Case-Shiller 20-City Home Price Index recorded a year-on-year increase of 1.1%, surpassing market expectations. Physical bullion demand exhibited regional divergence. India experienced gold trading at a premium for the first time in almost six weeks, driven by lower prices that stimulated buying activity, although the overall demand continued to be moderate.
In contrast, Chinese bullion persisted in trading at discounts, even as the People’s Bank of China prolonged its gold reserve accumulation for a nineteenth consecutive month. However, China’s net gold imports through Hong Kong experienced a decline of 38% month-on-month in May. Global investment demand has exhibited a decline, as evidenced by data from the World Gold Council indicating that global gold ETFs experienced net outflows amounting to US$2 billion in May. This development has led to a reduction in total assets under management to US$604 billion and a decrease in holdings to 4,121 tonnes.
Nevertheless, it is noteworthy that year-to-date inflows continue to reflect a positive trend, nearing US$17 billion. From a technical perspective, the market experienced short covering, as open interest decreased by 1.94% to 10,151 contracts while prices increased. Gold has immediate support at Rs 140,780, followed by Rs 139,025, whereas resistance is placed at Rs 143,960. A sustained breakout above this level could extend gains toward Rs 145,385.