Gold settled 0.9% higher at Rs 159,425, buoyed by an unexpected liquidity manoeuvre from the US Treasury that resulted in lower bond yields and a weaker dollar. However, the ascent was tempered by increasing oil prices and assertive signals from the Federal Reserve. The US Treasury has declared its intention to double the scale of liquidity-support buyback operations for longer-dated notes and bonds, thereby alleviating pressure within the bond market. Meanwhile, the Fed’s July meeting minutes revealed ongoing apprehensions regarding inflation, with certain policymakers suggesting that additional rate hikes may be necessary should price pressures continue to be high.
Traders are presently assigning a 67% likelihood to the Federal Reserve maintaining its current stance in September. Morgan Stanley anticipates that gold will surpass $5,000 per ounce by 2027, possibly even earlier, attributing this outlook to expectations of a sustained pause by the Federal Reserve, while noting that inflation data may introduce additional volatility. CFTC data indicated that COMEX gold net long positions increased by 9,470 contracts in the week ending August 11, reaching a total of 141,868 contracts. This trend reflects sustained investor interest in gold as a safe-haven asset in the context of geopolitical uncertainty and varying real interest rates.
Physical demand has continued to exhibit a lacklustre performance in significant Asian markets. Indian gold discounts expanded to $62 an ounce, marking the highest level in over two months, as elevated bullion prices suppressed consumption. India’s net gold imports experienced a year-on-year decline of 23%, totalling 98.1 tonnes in the June quarter. Concurrently, domestic gold demand saw a reduction of 6%, amounting to 131.4 tonnes. In the second quarter, global gold demand held firm at 1,268.9 tonnes, bolstered by robust central-bank acquisitions totalling 289 tonnes, which counterbalanced 45 tonnes of outflows from ETFs.
London vault holdings rose by 0.77% month-on-month, reaching a total of 9,464 tonnes. Gold is currently experiencing renewed buying interest, evidenced by a 1.36% increase in open interest, which now stands at 10,593 contracts, alongside a price increase of Rs 1,429. Support is positioned at Rs 157,630, with an additional level at Rs 155,835, whereas resistance is identified at Rs 160,610. A sustained move above Rs 160,610 could open the way toward Rs 161,795.
