Gold Prices Stay Cautious Amid Central Bank Buying and Geopolitical Risks

Gold prices have continued to be bolstered by central bank buying, but the outlook remains cautious. The dollar has remained firm, and Treasury yields have remained elevated near multi-decade highs, weighing on bullion.

Gold has experienced a steady but cautious week, with prices trading around $4,137 an ounce. A mix of factors has been influencing the market. This includes the weaker-than-expected US jobs report and steady inflation data, which have cooled off rate-hike worries somewhat.

As a result, the odds of an October interest rate hike have decreased to less than 1-in-5, down from around 40% just a week ago.

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Gold prices fell by more than 8% in September. Despite global gold ETFs experiencing a significant influx of over 70 tonnes of investments. This unusual disconnect can be attributed to a combination of futures traders cutting positions and ETF investors continuing to buy.

This has led to a disconnect between the two markets.

China has continued to expand its gold reserves for a 23rd consecutive month, adding to the uncertainty surrounding the market. Central banks have also purchased 39 tonnes of gold in August, bringing this year's total to 170 tonnes.

Furthermore, Iran's recent attacks on the Strait of Hormuz have increased geopolitical risk, pushing oil prices higher and adding to the market's volatility.

The key event this week is the release of the Fed's September meeting minutes. This will offer more clarity on policymakers' thoughts on further rate hikes. Markets are already leaning dovish for October.

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However, December hike odds remain high at over 85%, so any hawkish surprise in the minutes could shift sentiment quickly.

The near-term outlook for gold remains cautious, with lower yields providing some breathing room for the metal. However, levels remain historically elevated, and gold still lacks a clear catalyst for a sustained turnaround.

Technical Levels Gold (Spot) CMP: $4137/ozSupport: $4,077 / $4,000Resistance: $4,250 / $4,310MCX Gold CMP: Rs 1,49,400Support: Rs 1,47,265/ Rs 1,44,500Resistance: Rs 1,53,500/ Rs 1,55,680Silver: International Silver CMP: $60.75/ozSupport: $58.90 / $56.80Resistance: $63.50/ $65.