Gold settled 0.9% lower at Rs. 142,024 as rising prices and stronger-than-expected US consumer and producer inflation reinforced expectations of prolonged elevated Federal Reserve interest rates, exerting downward pressure on bullion. While the Federal Reserve is anticipated to maintain its current interest rates during the meeting scheduled for October 27-28, market forecasts indicate a 9% probability of a rate increase in October and an 81% likelihood for December, as reported by CME FedWatch.
Meanwhile, US initial jobless claims decreased by 6,000 to 194,000 in the week ending October 17, falling short of expectations of 200,000, which suggests ongoing strength in the labour market. The Kansas City Fed’s manufacturing production index decreased to 16 in October from 20 in September, indicating a modest slowdown in industrial activity. Physical demand exhibited varied trends, as Indian gold purchases saw an uptick during the Dussehra festival, while domestic premiums increased to $9 per ounce, up from $7 the previous week. Chinese bullion premiums held steady at 9-10 per ounce, despite ongoing pressure on jewellery demand.
China’s central bank has continued its gold acquisition for 23 consecutive months as of September, increasing its holdings to 77.47 million fine troy ounces from 76.73 million ounces in August. This comes even as the value of its gold reserves decreased to $323.52 billion. Swiss gold exports rose by 6% month-on-month, reaching 165.2 tonnes, bolstered by robust shipments to Britain, although exports to China and India experienced a decline. Goldman Sachs upheld its end-2027 gold price forecast at $5,400 per ounce, attributing this to ongoing central bank diversification as a significant structural driver. However, it noted that tighter monetary policy may impede near-term gains and provoke corrections.
Gold is currently experiencing a phase of long unwinding, as evidenced by a 2.54% decrease in open interest, bringing it down to 16,222 contracts, coinciding with a price drop of Rs. 1,285. The immediate support is positioned at Rs. 141,200, succeeded by Rs. 140,370, whereas resistance is observed at Rs. 142,990 and Rs. 143,950. A breach beneath support could amplify selling pressure, while a persistent advance above resistance might initiate a recovery.
