Gold prices retreated on October 29, surrendering earlier gains despite a weaker US dollar and declining Treasury yields, as stronger-than-expected US GDP growth reinforced concerns over a hawkish Federal Reserve. As per Mirae Asset Sharekhan, spot gold was trading at $4,016, down 1.2% for the day at the time of writing, with the metal down 7% this year as the rate cycle has turned higher. The decline comes as momentum selling and uncertainty ahead of the US midterm elections are outweighing the supporting factors like sharp decline in US yields in last two weeks and shaky AI sector. Gold may remain under pressure in the near term, with prices likely to test support around $3,930, although aggressive selling may be premature according to market analysts.
The Federal Reserve left the door open for an interest-rate hike before the end of the year to rein in stubborn inflation, with data released Thursday showing a 0.5% rise in the US personal consumption expenditures price index last month - the most since March. As per Moneycontrol, gold steadied above $4,000 an ounce as dip buyers entered the market before the Fed's interest-rate decision. Market participants are closely watching the Fed's report alongside crucial Personal Consumption Expenditures data that influences inflation strategies. The Federal Reserve kept the funds rate unchanged at 3.75-4.00% in its FOMC monetary policy concluded on October 28, but the decision carried a modest hawkish undertone with Lisa Cook and Beth Hammack dissenting in favour of a 25-bp hike. The probability of the US Federal Reserve hiking rates in December stands at 80%, with market participants seeing the Central Bank hiking rates 2.6 times in a year, much lower from nearly 4 hikes seen around five weeks back. The European Central Bank left the deposit rate unchanged at 2.5% as the Bank flagged downside risk to growth and upside risk to inflation due to high energy prices.
Oil prices experienced significant gains as Middle East tensions escalated, with Brent crude advancing above $115 a barrel after swinging more than $3 in the previous session, while West Texas Intermediate was near $103. According to Mirae Asset Sharekhan, crude oil prices fell on October 29 on the Wall Street Journal's report that US Vice President Vance has got in touch with Iranian Security Council chief Mohsen Rezaee in a bid to restart peace negotiations. The rally was also driven by reports that Iran navy claimed that a non-compliant oil tanker hit sea mines on October 29, with three tankers hit the mines in last two days. Israel's election results have been inconclusive as PM Netanyahu and his right-wing allies are projected to secure 53 seats, thus may fall short of majority of 61 in 120-seat Parliament, with the Opposition likely to get 47 seats and Arab parties winning 19 seats. Shell CEO Sawan said that oil spike does not look temporary anymore as inventory refill is required.
According to Ajay Kedia, director at Kedia Advisory, gold was technically witnessing short covering with open interest falling 2.34% to 15,622 contracts while prices rose by ₹1,065 during the period under consideration. Gold has support at ₹1,42,740, followed by ₹1,41,340, with resistance seen at ₹1,44,900. If prices sustain above this level, gold could rise towards ₹1,45,670, while a break below ₹1,42,740 could lead to further weakness and take prices towards ₹1,41,340. Silver was also technically witnessing short covering with open interest falling 0.86% to 16,539 contracts while prices rose by ₹924 during the period under consideration. Silver has support at ₹1,93,030, followed by ₹1,89,340, with resistance seen at ₹1,98,900. If prices sustain above this level, silver could rise towards ₹2,01,080, while a break below ₹1,93,030 could increase selling pressure and take prices towards ₹1,89,340. The gold-silver ratio rose nearly 1.5% to 76.57 on Thursday as silver has been falling more than gold, with the ratio potentially rising to 84 in the coming days.
Chinese households are demonstrating unprecedented appetite for gold as prices fall below $4,000 per ounce, with physical demand reaching levels that may determine whether the metal can maintain its current position. According to Bloomberg, the Au99.99 contract on the Shanghai Gold Exchange saw volumes jump to 43 million lots last week, or around 430 tons, marking the busiest week since April. This contract requires full payment and mandatory delivery, reflecting genuine physical demand rather than leveraged speculation. As Zijie Wu, an analyst at Jinrui Futures Co., noted, "Domestic gold demand is increasingly running against the price trend, strengthening as prices fall." Much of this buying runs through bank accumulation plans, with purchases under these schemes in the first nine months already surpassing the 2025 full-year total according to major banks, with buying accelerating over the past week as prices eased. China's gold market continues to demonstrate resilience with September imports rising 34% year-over-year to 144.9 tons, a three-month high, while year-to-date imports reached 1,286 tons, up 67% from the same period last year. Russia's gold holdings fell for the tenth straight month in September, declining 6.2 tons to the lowest level since late 2019 as Ukraine's Foreign Intelligence Service reported that Russia is drawing down its gold reserves to cover a widening budget deficit.
Global gold ETFs attracted inflows for the first time after four consecutive days of outflows, with holdings edging higher to 101 Moz on October 28 and ETF holdings presently 63.75 tons up (2.07% YTD). However, investors have sold nearly net 17.5 tons of gold through ETFs since October 21. Looking ahead, next week will be crucial for financial markets as US October ISM manufacturing (Nov. 2), September JOLTs job openings (Nov. 3), September final Durable goods orders (Nov. 3), October ADP employment change (November 4), October ISM services (Nov. 4), October nonfarm payroll (November 6) and November preliminary University of Michigan sentiment and inflation expectations (Nov. 6) will be released. The US Dollar Index was hovering around 102, down 0.2% for the day as it fell for the second straight day, while two-year yields fell for the second consecutive day with Twos at 4.66% down 3 bps for the day. The Bank of Canada hiked the benchmark rate by 25 bps to 2.5% as it revised its inflation forecast for 2027 higher from 2% to 3.1%, with the Bank warning that further rate hikes could be needed to stop high energy prices from broadening out.
