Gold settled 0.52% lower at Rs. 139,452, as energy-driven inflation concerns and expectations of further Federal Reserve monetary tightening exerted downward pressure on prices ahead of the US midterm elections. Comments from three Federal Reserve officials advocating for further rate hikes, alongside stronger US inflation in September driven by increased petrol and goods prices, bolstered expectations for a rate increase in December, with CME FedWatch reflecting a 75% probability.
Meanwhile, the World Gold Council has revised its forecast for gold investment demand growth in 2026, lowering it to 200 tonnes from the previous estimate of 400 tonnes. This adjustment is attributed to a decline in bar and coin purchases, although there has been an increase in the outlook for central bank buying. Physically backed gold ETFs experienced significant inflows of 211 tonnes in the third quarter. In contrast, bar and coin demand saw a year-on-year decline of 19%, totalling 268 tonnes, while jewellery consumption decreased by 17%, amounting to 313 tonnes. Central bank purchases rose by 42% to 321 tonnes, marking the highest quarterly level since Q4 2024. Year-to-date purchases have reached 675 tonnes, with full-year demand anticipated to at least equal 2025’s 848 tonnes.
In India, gold demand is anticipated to decrease to approximately 650 tonnes by 2026, marking the lowest level since 2020. This decline is attributed to high prices, diminished rural demand, and adverse monsoon conditions impacting jewellery purchases. In the September quarter, demand experienced a year-on-year decline of 29%, totalling 162.5 tonnes. This downturn was characterised by a 20% decrease in jewellery demand and a significant 40% drop in investment demand. Physical demand across major Asian markets has shown a lack of vigour, with Indian premiums declining to $7 per ounce from the previous $9.
Technically, the market is experiencing new selling pressure, with open interest rising by 0.87% to 16,282 contracts, while prices have decreased by Rs. 734, suggesting the establishment of short positions. Gold is presently encountering support at Rs. 138,070, beneath which prices may decrease toward Rs. 136,690. On the upside, resistance is positioned at Rs. 140,620, and a sustained movement above this level could facilitate a further recovery toward Rs. 141,800.
