Gold prices experienced a significant increase, rising by 1.9% to finish at Rs 136,744, following a peak at a record high. This movement was largely influenced by escalating geopolitical tensions and anticipations regarding future Federal Reserve rate reductions. The rally has been bolstered by persistent investment demand, as evidenced by gold-backed ETFs experiencing five consecutive weeks of inflows. Nonetheless, short-term dovish expectations appear subdued, as the CME FedWatch Tool indicates merely a 22.5% likelihood of a 25 bps rate reduction in the January meeting.

US inflation data for November indicated a moderation in pressures, as headline CPI decreased to 2.7% year-over-year and core CPI fell to 2.6%. However, Fed officials, including Cleveland Fed President Beth Hammack, advised caution in interpreting these figures, citing potential distortions stemming from the government shutdown.

Geopolitical risks persisted in supporting safe-haven demand, following recent developments concerning US actions near Venezuela and Ukraine’s strike on a Russian tanker. On the physical front, heightened prices have suppressed retail demand in significant Asian markets, as discounts have expanded in India and China, whereas premiums have stayed relatively modest in Singapore and Hong Kong. The central bank’s purchasing activity remained vigorous, driven by China’s thirteenth consecutive monthly increase and significant acquisitions from Poland and Brazil. Assets under management in ETFs have reached new highs, indicative of persistent investor engagement.

From a technical perspective, the market experienced short covering, as open interest decreased by 1% to 14,885 while prices increased by Rs 2,548. Gold currently exhibits immediate support at Rs 135,490; a breach beneath this level may lead to a test of Rs 134,235. Resistance is identified at Rs 137,410, with a breakthrough potentially paving the way to Rs 138,075.