Gold prices experienced a decline of 0.52%, settling at Rs 154,784, as apprehensions mount regarding the potential necessity for the U.S. Federal Reserve to implement additional interest rate hikes in response to persistently high inflationary pressures. Market sentiment was influenced by renewed geopolitical tensions in the Gulf region, which pushed crude oil prices higher and reinforced concerns about inflation. Comments from Cleveland Fed President Beth Hammack underscored that the U.S. labour market is operating close to full employment, while ongoing inflation could necessitate a more stringent monetary policy.

Supporting this view, the U.S. economy recorded a third consecutive month of robust job growth in May, providing the Federal Reserve with greater flexibility to maintain a hawkish stance. On the demand side, China’s central bank has continued its gold-buying streak for the nineteenth consecutive month, raising reserves to 74.96 million fine troy ounces in May. However, physical demand remained subdued across key Asian markets. In India, buyers predominantly refrained from participating in the market amid fluctuating international prices, while physically backed gold ETFs experienced their inaugural monthly net outflow in a year as investors realised profits following the recent surge.

In China, gold premiums have experienced a slight decline, indicative of a tempered consumer demand. According to the World Gold Council, global gold ETFs experienced net outflows of $2 billion in May, primarily driven by withdrawals from Asia and North America, although year-to-date flows continue to show a positive trend. Meanwhile, gold holdings in London vaults increased by 0.21% month-on-month, reaching 9,392 tonnes, underscoring persistent institutional interest in the precious metal.

Technically, the market is experiencing long liquidation, as evidenced by a 2.45% decrease in open interest to 8,591 contracts, coinciding with the decline in price. Gold is presently underpinned at Rs 153,230, and a decline beneath this threshold could catalyse additional weakness toward Rs 151,670. On the upside, resistance is observed at Rs 155,830, and a sustained move above this level could pave the way for a rally toward Rs 156,870.