Gold has been trading in very narrow ranges and it was not able to break above the 1730 level for a long time and at the same time it has been basing at the 1640-1680 levels. This indicates the lack of any fresh factors to trigger a move in either direction. Against an elevated inflation, the Fed has been consistently maintaining a hawkish stance followed up with rate hikes, and this is the singular factor that has put a lid on the potential advances by gold. While the inflationary pressures may continue for more time, for a fall from the current 8.40% to the target level of 2%, improvements in gold prices would be forthcoming only with a moderation in the hard money policies followed by the global central banks. The probability of gold prices seriously dipping lower is obstructed by the barrier of cost of production as any fall takes it closer to the cost of production. Despite inflationary pressures gold could not move up because of the rising market yields and currency yields. Also, in the dollar index the US Dollar has been steadily rising. In a scenario of rising dollar, it is less likely that gold would be able to make much headway to higher levels. But a moderation in central bank rate hikes could be beneficial for the yellow metal. But that be sometime from now. Gold may be range bound – the broad range being 1730 – 1860.
Gold demand is reported to have been on a firmer footing in Q3 of this year. The demand came mainly from central bank buying, amounting to 400 tonnes for the quarter and retail consumers. The easing of covid related restrictions in China helped push up demand in China and retail jewellery demand in India too supported the markets. Jewellery consumption rose to 523 tonnes, a 10% year-on-year rise despite the adverse sentiment. Overall demand growth was 28% on a Y-o-Y basis. But the 227 tonnes of ETF outflows reflected the underlying weak sentiment.