Gold settled down 0.16% at Rs 152,579 as traders increased bets on a potential U.S. interest-rate hike, driven by stronger job growth in August and ongoing inflationary pressures stemming from renewed tensions between the U.S. and Iran. The U.S. unemployment rate held firm at 4.1%, while market expectations indicate a 60% likelihood of a rate increase at the upcoming Federal Reserve meeting, as reported by CME FedWatch. Attention now shifts to the U.S. producer price index due Thursday and consumer price index data scheduled for Friday, which may impact monetary-policy expectations and the near-term trajectory of gold.
Higher interest rates typically exert downward pressure on non-yielding gold by elevating the opportunity cost associated with holding bullion. Geopolitical risks continue to provide support, as Iran issues threats of economic warfare against the United States and reports an advanced missile launch aimed at U.S. warships, heightening concerns regarding potential escalation and inflation driven by oil. Meanwhile, China’s central bank has continued its gold acquisition for 22 consecutive months, increasing its holdings to 76.73 million fine troy ounces from 76.08 million in July. The value of China’s gold reserves increased to $350.08 billion, up from $306.35 billion.
Physical demand in India saw an uptick as reduced prices stimulated purchasing activity, with discounts contracting significantly to $54 an ounce from $135 the previous week. Meanwhile, Chinese bullion was observed trading at premiums ranging from $3.5 to $9. London vault holdings increased by 0.74% month-on-month, reaching 9,534 tonnes at the end of July, with a valuation of approximately $1.2 trillion.
Technically, the market continues to experience long liquidation, as evidenced by a 1.76% decline in open interest to 10,406, accompanied by a price drop of Rs 239. Gold is presently encountering support at Rs 151,945, and a breach beneath this threshold may lead to a further decline toward Rs 151,310. On the upside, resistance is positioned at Rs 153,670, and a sustained move above this threshold could initiate a recovery toward Rs 154,760.
