Gold's ascent, marking a notable 1.52% increase to settle at 72727, mirrors the market's reaction to weak U.S. employment figures, stoking anticipation of Federal Reserve interest rate cuts. With new claims for unemployment benefits surpassing expectations, traders are heavily pricing in a 69% likelihood of a rate cut by September, as per CME's FedWatch Tool. The uncertainty surrounding U.S. inflation, as highlighted by San Francisco Federal Reserve President Mary Daly, further bolsters this sentiment.
Despite this, physical gold demand during a significant festival in India was unexpectedly subdued due to near-record high prices. Retail buyers were deterred, leading dealers to offer substantial discounts. Similarly, in China, premiums surged to $26-$35 per ounce over benchmark spot prices, indicative of the delicate balance between price levels and consumer demand. While demand slightly improved after the Golden Week holiday in Japan, the overall market sentiment remained cautious. Looking forward, investor focus shifts to forthcoming U.S. producer price index and consumer price index data, crucial for gauging the Fed's rate trajectory.
From a technical standpoint, the gold market is undergoing short covering, evidenced by a 2.72% drop in open interest alongside a significant price surge of 1088 rupees. Key support levels for gold are identified at 72010, with potential downside testing to 71290 levels. Conversely, resistance is anticipated at 73170, with a breakthrough potentially leading to further price testing at 73610.