At the time of writing, XAU/USD was trading around $4,663, up nearly 1.3% on the day after touching an intraday high of $4,681. The move marked the precious metal’s strongest level since May 14, although buyers appeared reluctant to push prices significantly higher ahead of the release of fresh US inflation data and a speech by Federal Reserve Chair Kevin Warsh.
Strategists at OCBC said the market has seen the return of “USD debasement” as a key theme following the US Treasury’s unexpected expansion of its long-end bond buyback programme.
The strategists said the decision points to “discomfort with the recent rise in long-dated yields,” while the subsequent unwinding of US steepener positions may have strengthened a number of related trades, including a weaker US dollar, stronger gold prices and higher US inflation expectations.
The Greenback recovered modestly on Monday after suffering a sharp decline last week. The US Dollar Index (DXY), which measures the dollar against a basket of six major currencies, was around 98.96, up approximately 0.12% on the day.
Despite the slight recovery in the dollar, gold continued to benefit from broader concerns surrounding US fiscal policy and government debt. A weaker dollar generally makes gold more attractive to buyers holding other currencies, while uncertainty can also increase demand for the precious metal as a traditional safe-haven asset.
Geopolitical developments are also adding another layer of uncertainty to the market. US Treasury Secretary Scott Bessent is expected to announce fresh sanctions on Iran, while Tehran has warned that continued US economic pressure could prompt it to halt oil exports through the Strait of Hormuz and other parts of the Persian Gulf.
Any disruption to energy supplies could revive concerns about inflation, potentially complicating the outlook for global central banks and adding to market volatility.
US Inflation Data, Fed Speech in Focus
Investors are now turning their attention to several important events later this week, particularly the July Personal Consumption Expenditures (PCE) Price Index due on Wednesday.
The PCE report is closely watched by the Federal Reserve because it provides an important measure of consumer inflation. Traders will be looking for evidence of whether price pressures are continuing to moderate or remain elevated enough to influence the central bank’s interest-rate decisions.
Markets will also pay close attention to Federal Reserve Chair Kevin Warsh’s remarks at the Jackson Hole Symposium on Friday. His comments could offer clues about the central bank’s thinking on inflation, interest rates and the broader economic outlook.
The CME FedWatch Tool currently shows roughly a 38% probability of a rate hike at the Fed’s September meeting, making incoming economic data and policymakers’ comments particularly important for financial markets.
Gold Technical Outlook
From a technical perspective, gold retains a bullish near-term bias, with XAU/USD trading above both its 200-day and 100-day simple moving averages.
The broader trend remains strong, supported by an Average Directional Index reading of 33. However, the daily Relative Strength Index has climbed to 72, moving into overbought territory. This suggests that while buyers remain firmly in control, the recent rally may have become stretched and could be vulnerable to a period of consolidation or a short-term pullback.
The positive Moving Average Convergence Divergence indicator also continues to support the bullish outlook.
On the upside, the first major resistance level is around $4,685, corresponding to the 78.6% Fibonacci retracement. A sustained break above that area could open the door towards the cycle-high region near $4,886.
On the downside, initial support is located around $4,528, the 61.8% Fibonacci retracement. The level is closely supported by the 200-day SMA near $4,517, creating an important demand zone.
If gold falls below that area, further support can be found around $4,417 and $4,380, corresponding to the 50% Fibonacci retracement and 100-day SMA respectively. Additional support levels sit around $4,307 and $4,170.
For now, the broader technical structure continues to favour the bulls, although the elevated RSI suggests traders should be alert to a possible correction if buying momentum begins to fade.
Gold’s latest advance has been supported by a combination of dollar weakness, concerns over US fiscal policy, safe-haven demand and expectations surrounding inflation and interest rates. With the PCE inflation report and Fed commentary due later this week, the metal’s next major move could depend on whether incoming data reinforces or challenges the current bullish narrative.