Gold yesterday closed up by 0.38% at Rs 121067, as weaker U.S. labor market data bolstered expectations for a forthcoming Federal Reserve rate cut. In October, Challenger job cuts experienced a threefold increase, representing the most significant monthly rise in more than twenty years, attributed to declining consumer demand by companies. The data tempered optimism stemming from stronger ADP payrolls and increased uncertainty regarding labor conditions, leading markets to adjust their expectations to a 69% probability of a quarter-point rate cut in December, an increase from 60% the previous day.

A depreciating U.S. dollar bolstered gold’s attractiveness to foreign investors, while persistent uncertainty stemming from the U.S. government shutdown heightened demand for safe-haven assets. Meanwhile, the People’s Bank of China has continued its gold acquisition for the 12th consecutive month, with reserves rising to 74.09 million fine troy ounces in October. In the third quarter, global gold demand experienced a year-on-year increase of 3%, reaching a record high of 1,313 tonnes.

This growth was primarily fueled by a notable 17% rise in bar and coin investment, alongside a remarkable 134% increase in ETF inflows, as per reports. Nonetheless, jewellery demand experienced a decline of 23% in the context of high prices. In the third quarter, central banks increased their holdings by 219.9 tonnes, reflecting a 10% year-on-year rise. Concurrently, mine production experienced a 2% increase, and recycling saw a growth of 6%, contributing to a record high in total supply.

From a technical perspective, the market is experiencing short covering, evidenced by a decline in open interest of -4.32% to 12,906, accompanied by a price increase of Rs 454. Gold is currently encountering support at Rs 120530, with a potential decline below this level likely to test Rs 119995. Conversely, resistance is identified at Rs 121620, and an upward movement beyond this point could result in a target of Rs 122175.