Gold yesterday closed higher by 0.74% at Rs 1,10,179 as the dollar index fell to 97.3, marking its lowest point since late July. The market has predominantly factored in a 25 basis points rate cut by the Federal Reserve, anticipated on Wednesday, while maintaining a minimal probability of a 50 basis points reduction in light of indications of a softening labor market. Investors are closely examining the Fed’s revised macroeconomic forecasts, particularly regarding the trajectory of interest rates, with anticipations of ongoing easing as the year concludes. The division of votes within the Federal Open Market Committee (FOMC) is likely to attract scrutiny, given that a three-way split has not occurred since 2019.

UBS has adjusted its gold price forecast upward by $300, projecting a price of $3,800 per ounce by the end of 2025 and $3,900 by mid-2026. This revision is attributed to anticipated Federal Reserve easing, a depreciating dollar, and heightened geopolitical risks. On the demand side, physical gold purchases have been subdued in key Asian markets as a result of record-high prices, with China providing discounts ranging from $17 to $24 per ounce. India’s domestic market experienced a contraction in discounts to $6, while premiums increased to $2 per ounce.

In the second quarter of 2025, central bank purchases experienced a notable decline of 21%, concurrently with global gold ETF holdings approaching near-record levels. Investment demand experienced a significant increase of 78% year-over-year, effectively counterbalancing declines in jewelry demand.

From a technical perspective, the market is experiencing short covering, as evidenced by a 2.46% decline in open interest to 15,570, alongside a price increase of Rs 809. Support is positioned at Rs 1,09,280, with a potential further examination of Rs 1,08,375 on the horizon. Resistance stands at Rs 1,10,710, with a potential upward movement leading prices to test Rs 1,11,235.