Yellow metal's demand in India remains muted in October, reports World Gold Council

On the back of rising bond yields, the yellow metal has been expensive in October by around 1.5 per cent, the World Gold Council said in its monthly report. Adding that the retail demand in the month remained brisk during the start of the month with the onset of Navratri. 

The council report suggested that the surge in inflation expectations, a weaker dollar, and improving futures positioning helped propel it higher, as highlighted by our return attribution model. 

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“Bullion offtake, however, fell during the third week of the month with the sudden increase in domestic gold price helped by rising gold price and weaker rupee”, the council said in the report. 

It added that this pushed down the local gold price to an average discount of US$1.5/oz during the third week compared to an average premium of US$1.5/oz in the first two weeks of the month.  

Anecdotal evidence suggests strong retail demand (for both jewellery and bar and coin) ahead of Dhanteras - one of the historically strongest periods of gold demand – which pushed the local market to a premium of US$1-2/oz by the end of the month. 

Meanwhile, Gold ETFs have shown net disinvestment in 2021 but vaulted physical holdings and bar and coin markets suggest solid investment appetite from longer-term investors, the report said. 

From a technical analysis perspective, US$1,800/oz has been a sticky level, with regular price reversals to that level on both strength and weakness, the WGC said, adding further, the price has struggled to hold above the 200-day moving average, at current just below US$1,800/oz level. 

Going forward, the council mentioned that some central banks are beginning to raise rates or taper asset purchases and investors are beginning to focus on flattening rates curves and their potential implications if the trend continues.