Gold yesterday settled lower by 2.02% at Rs 1,20,957 as optimism over progress in the US-China trade talks diminished the demand for safe-haven assets. Following comprehensive negotiations in Malaysia, the two nations have arrived at a preliminary accord addressing export controls, agricultural trade, and the regulation of fentanyl. Presidents Trump and Xi are anticipated to formalize this agreement later in the week. The reduction in geopolitical tensions has led investors to favor riskier assets, consequently impacting bullion prices negatively.

In the interim, market participants are attentively monitoring significant central bank gatherings, as the US Federal Reserve is broadly anticipated to reduce interest rates by 25 basis points, whereas both the ECB and the Bank of Japan are expected to maintain their current policy rates. The protracted US government shutdown, now extending into its 27th day, persists in generating uncertainty; however, its immediate influence on gold has been mitigated by a strengthening risk sentiment.

On the macro front, the recent decline in inflation data coupled with increasing expectations for rate cuts has solidified the perspective that monetary easing is likely to persist, which may provide support for gold in the medium term. Reports suggests a 96.7% likelihood of a rate cut this week and a 95.8% chance of an additional cut in December. In India, physical demand has been relatively muted in anticipation of Diwali, as consumers are holding out for more significant price adjustments, although the festive season has provided some degree of support. In August, Swiss gold exports to China experienced a remarkable increase of 254%, alongside a rise in shipments to India.

The market is currently experiencing new selling pressure, as indicated by a 5.38% increase in open interest, now at 13,007. Support levels are identified at Rs 1,19,740 and Rs 1,18,515, whereas resistance is positioned at Rs 1,22,540 and Rs 1,24,115.