On Monday, gold extended its strong momentum from the previous week. Spot gold opened slightly higher, rallied more than 1% intraday to settle above $4,390.00 per troy ounce and hit a peak of $4,394.86, closing at $4,390.03. The nearly two-month sideways consolidation range was fully broken, officially kicking off an upward rebound cycle. Bullish sentiment heated up further on Tuesday. During the ASIan session, spot gold staged a powerful rally and broke decisively above the $4,400.00 threshold, reaching an intraday high of $4,434.80. However, the sharp rally proved unsustainable. After touching a two-month-plus high, gold reversed course and turned negative on the day. Technical signals point to mounting upside pressure, with prices capped below the 200-day moving average at $4,496.50. At press time, spot gold had retreated to around $4,386.85. Markets are now awaiting the release of U.S. July CPI and PPI on Wednesday and Thursday respectively, to gauge whether inflation is cooling or remains elevated, and extract further clues on the Federal Reserve’s future monetary policy path.

On Monday, Beth Hammack, President of the Federal Reserve Bank of Cleveland, stated that multiple interest rate hikes would likely be needed to contain elevated inflation, arguing that a single 25-bASIs-point adjustment would have a limited economic impact. Hammack dissented against the Fed’s decision to hold rates steady at last month’s FOMC meeting and advocated for a 25bp rate increase. She warned that the longer the Fed waits to act, the longer it will take to bring inflation down to the 2% target and the harder the disinflation process will become. She noted that the July payroll report’s unexpected drop of 23,000 jobs had not diverted her focus away from inflation. Over the past 12 months, nonfarm payrolls have averaged a monthly gain of 20,000 to 25,000, and the current 4.1% unemployment rate is roughly in line with her estimate of full employment.

On the geopolitical front, Iran said on Monday that even if it strikes a deal with Oman to administer shipping in the Strait of Hormuz, the waterway cannot be fully reopened until the U.S. accepts a set of preconditions. In response to Tehran’s demand for Washington to pay war damages, U.S. President Donald Trump countered the terms of Iran’s proposed peace accord and demanded that Iran compensate for fatalities stemming from wars, military attacks and protests over the past five decades. This rhetorical escalation has complicated efforts to reopen the Strait of Hormuz. In addition, shipping through the Bab-el-Mandeb Strait remains blocked due to Houthi militia blockades backed by Iran targeting Saudi Arabia. The disruption drove a sharp overnight jump in crude oil prices, stoking inflation fears and reinforcing expectations of a more hawkish Federal Reserve policy stance.

Short-term gold market outlook: Key upside resistance for spot gold stands at $4,495.00, with major downside support located at $4,225.00.

Spot Gold Daily Chart

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