Gold settled lower yesterday by -1.13% at Rs 112,555, reflecting profit booking following US Fed Chair Jerome Powell’s cautious remarks regarding interest rate cuts. Despite recent gains bolstered by safe-haven demand, the yellow metal encountered pressure as Powell underscored the Federal Reserve’s challenge of reconciling persistent inflation with a declining job market. While certain Fed officials, such as Stephen Miran, championed a robust easing approach, others emphasized the need for caution, resulting in a divergence in policy expectations.

Current market expectations indicate the likelihood of two 25 basis point reductions, scheduled for October and December, with probabilities standing at 90% and 73% respectively. Geopolitical tensions, notably NATO’s admonition regarding Russia’s infringement of Estonian airspace, combined with robust ETF inflows reaching a three-year peak, provided a favorable backdrop for gold.

On the physical side, India’s gold premiums have reached a 10-month high of $7/oz, driven by increased festive demand despite record prices. In contrast, China’s discounts have expanded to a five-year peak, reflecting a decline in investor demand. In August, Swiss gold exports to China experienced a remarkable increase of 254%, reaching 35 tons. Meanwhile, shipments to India also saw an uptick, which helped to mitigate a significant decline in deliveries to the US.

From a technical perspective, the market is experiencing long liquidation, evidenced by a significant decline in open interest, which has decreased by -26.16% to 6,536 contracts, coinciding with a price drop of Rs 1,281. Gold currently has support at Rs 112,090, with a potential decline testing Rs 111,630. Resistance is identified at Rs 113,425, and a breakthrough above this level could propel prices towards Rs 114,300.