Gold settled 0.34% higher at Rs 1,52,981, buoyed by short covering as investors recalibrated their positions in the wake of the US Federal Reserve’s initial rate hike in three years. The dollar retreated from a seven-week high following the decision by policymakers to raise rates and indicate further tightening measures, as Fed officials continued to underscore the persistent risks associated with elevated inflation. Higher interest rates typically diminish gold’s allure by enhancing the attractiveness of interest-bearing assets, with monetary policy expectations remaining a crucial factor influencing bullion. The Bank of England maintained its current interest rates, whereas the Bank of Japan is anticipated to increase rates to a level not seen in 31 years.
Meanwhile, alleviating worries regarding oil supply interruptions and anticipations of advancements toward resolving the Iran conflict exerted downward pressure on crude prices, which may mitigate inflationary pressures and curtail demand for safe-haven assets. Goldman Sachs upheld its end-2026 fair-value forecast at $4,900 per ounce, while emphasising the likelihood of two-way and potentially more volatile price fluctuations, bolstered by ongoing central-bank demand. A resumption of ETF inflows and elevated call-option positioning could amplify rallies through dealer hedging, while renewed expectations of Fed rate hikes could trigger sharper pullbacks.
COMEX gold speculators decreased net longs by 1,263 contracts to 139,548 for the week ending September 8, suggesting a slight easing in bullish sentiment. Physical demand in India has exhibited a subdued trend against a backdrop of volatile prices, with dealers now extending discounts of up to $75 per ounce, a notable increase from the previous $54. In contrast, Chinese bullion is trading at a premium of $8 per ounce. London vault holdings increased by 0.74% month-on-month, reaching 9,534 tonnes at the end of July, with an estimated value of around $1.2 trillion.
Technically, the market continues to experience short covering, as evidenced by a 4.31% decline in open interest to 8,438, alongside a price increase of Rs 511. Gold has established a support level at Rs 1,51,165, and a decline beneath this threshold may reveal a further downside to Rs 1,49,345. Resistance is positioned at Rs 1,54,125, beyond which prices could potentially reach Rs 1,55,265.
