Gold prices fell by -0.31% to settle at 71,381 as traders reassessed the economic and monetary outlook amid mixed economic signals. The ISM Manufacturing PMI indicated a fifth consecutive month of contraction in U.S. factory activity, sparking concerns over the impact of elevated interest rates on the U.S. economy. These concerns have heightened anticipation for upcoming economic data, particularly the JOLTS report and the broader jobs report. These will provide further insights into labour market conditions and guide expectations for the Federal Reserve's potential rate cut later this month.
Market participants have already factored in a rate reduction on September 18th, with a 40% probability of a 50 basis point cut, while a smaller 25 basis point decrease remains more likely at around 60%. In the physical gold market, Indian gold discounts widened to their highest in six weeks as a price rebound dampened consumer demand. Other Asian markets, including Singapore, Hong Kong, and Japan, also saw varying levels of premiums and discounts, reflecting a cautious market sentiment. The World Gold Council noted that India's gold demand fell by 5% in the June quarter compared to the previous year, but a recovery is anticipated in the second half of 2024 due to a correction in local prices following a significant reduction in import taxes and favourable monsoon rains.
Technically, the gold market is experiencing long liquidation, with a 1.83% drop in open interest, settling at 15,701 contracts. Prices are currently supported at 70,995, with a potential test of 70,615 if this level is breached. On the upside, resistance is likely at 71,760, and a move above this could see prices testing 72,145.