Gold prices settled lower by 0.91% at Rs 153,466, reflecting ongoing profit-taking pressure following US inflation data that diminished expectations for an imminent Federal Reserve rate hike. The US Consumer Price Index inflation rate decreased to 3.4% year-on-year in July, down from 3.5% in June. This aligns with market expectations and signifies a second consecutive month of diminishing annual inflation. Markets currently assign a 36% likelihood to a rate hike at the September Fed meeting, a significant decrease from approximately 55% just a week prior. This shift maintains a spotlight on the forthcoming Producer Price Index for additional insights into inflation and monetary policy.
Fed Bank of Chicago President Austan Goolsbee adopted a cautious position, emphasising a heightened concern regarding enduring inflation rather than the fragility of the labour market. Geopolitical uncertainty continues to bolster bullion, as the US-Iran conflict and ongoing negotiations regarding the Strait of Hormuz sustain safe-haven demand. However, reports of a prolonged ceasefire have tempered immediate risk premiums. Physical demand has continued to exhibit a lacklustre performance across key Asian markets. Indian gold discounts expanded to $47 per ounce, up from $44 the previous week, whereas Chinese premiums contracted to a range of 3-5 from 5-8.
The World Gold Council reported that India’s June-quarter net gold imports declined 23% year-on-year to 98.1 tonnes, while demand fell 6% to 131.4 tonnes. In the second quarter, global gold demand held firm at 1,268.9 tonnes, driven by a notable increase in central-bank acquisitions, which reached 289 tonnes, effectively counterbalancing 45 tonnes of outflows from exchange-traded funds. London vault holdings rose by 0.77% month-on-month, reaching a total of 9,464 tonnes, which is valued at $1.2 trillion.
Technically, the market continues to experience long liquidation, as evidenced by a 5.59% decrease in open interest, bringing it down to 9,766 contracts, coupled with a Rs 1,416 decline in prices. Gold is presently encountering support around Rs 152,755; a breach of this threshold may reveal Rs 152,050. On the upside, resistance is positioned at Rs 154,655, and a sustained movement above this level may initiate a recovery toward Rs 155,850.
