Gold experienced a significant decline yesterday, settling down by -2.52% at Rs 123561, influenced by a series of hawkish remarks from U.S. Federal Reserve officials that tempered expectations for a rate cut in December. Despite the U.S. government reopening following a notable 43-day shutdown, uncertainty remains as the release of October unemployment data is in jeopardy, potentially depriving markets of essential economic indicators. Federal Reserve officials underscored the ongoing risks associated with inflation and the robustness of the labor market, leading traders to reevaluate their projections.
The probability of a December quarter-point cut, as indicated, has decreased to 49%, a decline from the previous figure of 64%. Demand for physical gold in key Asian markets has remained lackluster, attributed to high price levels. India experienced a significant impact, as dealer discounts expanded to $43 per ounce, marking the highest level in five months, in contrast to $14 observed the previous week. The IBJA has called on the government to address a loophole that permits duty-free imports of platinum-alloy jewellery with a gold content of 90%.
In China, gold experienced fluctuations ranging from a $8 discount to a $4 premium. In Singapore, premiums were observed between $1.50 and $3.50, while Hong Kong recorded premiums of $0.50 to $2.50. Japan’s market reflected prices at par to a $0.50 premium. The World Gold Council indicated that global gold demand increased by 3% year-over-year to 1,313 tons, marking the highest level recorded for any quarter, propelled by robust investment demand. ETF inflows experienced a remarkable increase of 134%, whereas demand for bars and coins rose by 17%, compensating for a 23% decline in jewellery fabrication.
From a technical perspective, the market is experiencing long liquidation, evidenced by a 0.06% decline in open interest. Gold currently has support at Rs 121220; a decline below this level could lead to a test of Rs 118885. Resistance is established at Rs 126470, with the possibility of further upward movement towards Rs 129385.