Gold closed 1.13% higher at Rs. 147,489 as investors evaluated the likelihood of additional Federal Reserve rate hikes and the currency and US Treasury yields continued to be under pressure. In September, US consumer prices experienced an uptick, primarily propelled by rising petrol prices. This development has intensified worries regarding ongoing inflationary pressures that may indicate a sustained underlying inflation trend. San Francisco Fed President Mary Daly suggested that additional rate increases could be warranted, yet she did not perceive an immediate necessity for action in October.
Meanwhile, Michelle Bowman advocated for a cautious approach, and Alberto Musalem highlighted the importance of returning inflation to the 2% target. Markets have adjusted to reflect a 29% probability of an October rate hike, an increase from the previous 22% prior to the release of the inflation data. The IMF cautioned that high levels of public debt and inflation driven by conflict may lead to an increase in bond yields. Physical gold demand in India exhibited a lacklustre performance, as discounts contracted to $6 per ounce from a prior $14, whereas China experienced a $10 premium in the wake of the Golden Week holiday.
At the conclusion of September, London vaults contained 9,821 tonnes of gold, reflecting a month-on-month increase of 1.96%, with a total valuation of $1.3 trillion. China’s central bank has continued its gold acquisition for 23 consecutive months, raising its holdings to 77.47 million fine troy ounces, up from 76.73 million ounces. However, the reserve value has decreased to $323.52 billion, down from $350.08 billion. Goldman Sachs upheld its end-2027 gold projection at $5,400 per ounce, attributing this to ongoing central bank diversification. However, it cautioned that three further US rate hikes might lead to a correction toward $4,070, followed by a rebound to $4,200 by the end of 2026.
Gold is currently experiencing short covering, as evidenced by a 2.86% decline in open interest to 17,085 contracts, alongside a price increase of Rs. 1,641. The market is currently establishing a support level at Rs. 147,040, and should prices fall below this threshold, they may subsequently test Rs. 146,600. Resistance is positioned at Rs. 147,990, and a sustained advance beyond this threshold may propel prices toward Rs. 148,500.
