Gold settled sharply lower by 1.75% at Rs 145,848, influenced by stronger-than-expected US inflation data that bolstered expectations of a more stringent Federal Reserve monetary policy. In September, the year-on-year US CPI inflation rose to 3.7%, exceeding the expected 3.6%. Additionally, monthly inflation experienced an increase of 0.6%, marking the most substantial rise in five months. Core inflation has reached 2.6% on an annual basis and 0.3% on a monthly basis, surpassing expectations and intensifying the pressure on the Federal Reserve to maintain a restrictive policy stance.
Markets currently perceive an increased likelihood of further rate hikes, as St. Louis Fed President Alberto Musalem suggested that additional tightening might be required to return inflation to the 2% target. Heightened anticipations surrounding interest rates have placed strain on non-yielding gold; nonetheless, ongoing purchases by central banks provided a fundamental level of support. In September, China’s central bank maintained its gold purchasing trend for the 23rd consecutive month, increasing its holdings to 77.47 million fine troy ounces, a rise from 76.73 million ounces in August. This occurred even as the value of its reserves fell to $323.52 billion, down from $350.08 billion.
Goldman Sachs maintained its end-2027 gold price forecast at $5,400 per ounce, citing continued central bank diversification as a key factor. However, it cautioned that a more hawkish Federal Reserve might lead to a correction toward 4,070, followed by a recovery to approximately 4,200 by the end of 2026. Physical demand in India and China has exhibited indications of softness, with Indian dealers offering discounts that have reached $6 per ounce. In contrast, Chinese bullion is currently trading at a premium of $10 per ounce compared to the global benchmark.
Gold holdings in London vaults increased by 0.74% month on month, totalling 9,534 tonnes at the end of July 2026. Technically, the market is encountering fresh selling pressure, with open interest rising by 0.23% to 17,588 contracts, while prices declined by Rs 2,602. Gold demonstrates support at Rs 144,770; a drop below this threshold could prompt prices to approach Rs 143,700. Resistance is positioned at Rs 147,780, and a sustained movement above this threshold could propel prices toward Rs 149,710.
