Gold yesterday settled 1.11% higher at Rs 1,25,225, buoyed by increasing expectations of a US Federal Reserve rate cut in December following dovish remarks from several Fed officials. Fed Governor Christopher Waller indicated backing for a forthcoming rate cut in light of ongoing weakness in the labor market, reflecting sentiments expressed by Mary Daly and John Williams. The probability of a 25 basis points reduction in December has increased significantly to 81%, compared to approximately 40% just a week prior.

Market participants are currently looking to the upcoming US weekly jobless claims for additional insights into economic momentum and the trajectory of monetary policy. In terms of physical metrics, China’s gold imports through Hong Kong experienced a significant decline, plummeting by 64% in October. The total imports via Hong Kong amounted to 30.08 tons, reflecting a month-over-month decrease of 17%.

Swiss gold exports to China experienced a significant decline of 93%, attributed to record-high prices that have dampened demand. China’s adjustment of the VAT on gold purchases, effective November 1, is anticipated to increase expenses for both jewellery and industrial buyers. Nonetheless, the PBOC has maintained its purchasing momentum for the twelfth month in a row, increasing reserves to 74.09 million ounces. Asian physical demand exhibited a lack of vigor, attributable to the prevailing price volatility. Indian dealers provided discounts of $21 per ounce, a reduction that is less pronounced than the $43 observed in the previous week. Chinese and Hong Kong markets experienced transactions at or near small discounts or premiums, whereas Singapore and Japan noted slight premiums.

Gold is experiencing short covering, as evidenced by a decline in open interest of 11.15%, bringing it to 8,024. Support is positioned at Rs 124,620, with additional potential decline towards Rs 124,010. Resistance stands at Rs 125,680, and a breakout may propel prices to Rs 126,130.