The US Federal Reserve’s hawkish comments yesterday caused gold to decline by -0.33% to settle at 59157. In its most recent report to Congress, the Fed said that while inflation in important segments of the US services industry “remains elevated and has not shown signs of easing,” it decided to leave interest rates steady but gave a hint that it would tighten them further this year.
At the moment, markets are pricing in another 25 basis point rate increase from the Fed in July, followed by a pause. Investors watch the Fed members’ multiple scheduled visits this week for fresh direction. The European Central Bank announced a further 25 basis point rate hike on Thursday and hinted at additional increases.
As domestic prices declined, buyers purchased more physical gold in most Asian hubs, but dealers in India kept their discounts open and jewelers reduced their stock due to uncertainty about demand in the coming months. The $5 discounts from the previous week were replaced by discounts from dealers of up to $2 per ounce over official domestic pricing. Due to uncertainty about demand in the upcoming months, jewelers have been operating with low inventory.
In June, a month that saw unexpected rate rises from the Reserve Bank of Australia and the Bank of Canada, the Bank of England is likewise expected to increase rates once more. Technically, the market is experiencing new selling as open interest increased by 0.04% to settle at 13723 while prices are down 197 rupees. Currently, gold is receiving support at 59058 and a move below that level could result in a test of 58959 levels. Meanwhile, resistance is now likely to be seen at 59313, and a move above could result in a test of 59469 levels.
