On Monday, spot gold maintained an oscillating upward trend, rallying intraday to break above $4,400.00 per ounce once again. Previously, US employment and consumption data fell short of expectations across the board. July retail sales dropped 0.6% month-on-month, marking the steepest decline in nearly a year and signalling cooling inflation, which served as the core driver behind this round of gold’s rebound. At close, spot gold settled at $4,416.75 per ounce, up nearly 1%. On Tuesday, the US dollar rebounded further from a more than two-month low. The deadlock between the US and Iran consolidated the dollar’s safe-haven status and weighed on gold. During the European trading session, spot gold halted its two-day rally and traded below $4,400.00 per ounce. At press time, it hovers around $4,392.95 per ounce, shifting from a one-sided rally into high-level consolidation.

Geopolitical tensions in the Middle East keep escalating. The 60-day validity period of the memorandum of understanding reached between the US and Iran in June expired officially on Monday. The US refused to extend the agreement, and no progress was made in bilateral negotiations. Iran threatened to escalate military operations. Tanker traffic through the Strait of Hormuz shrank sharply, and Brent crude surged back above the $90 per ounce threshold, reviving concerns over energy-driven inflation. US President Donald Trump explicitly stated he would not seek an extension of the memorandum with Iran, remarking there was “no timeline” for resolving the Iran issue. Iran, for its part, said it had decided to shift its policy from “defensive” to “fully offensive”. While geopolitical conflict triggers safe-haven capital allocation into gold and rising oil prices lift long-term inflation expectations, reinforcing gold’s inflation-hedging value, markets also worry that a sustained oil price spike could force the Federal Reserve to resume rate hikes, turning into headwinds for gold’s upside.

On Tuesday, the yield on the US 30-year Treasury bond climbed to 5.33%, hitting a 19-year high since 2007. The rally in long-dated yields stems from market concerns that high oil prices will push up long-term inflation and heavy US fiscal bond issuance pressure. It also caps gold’s long-term upside. Should long yields keep rising later, gold may face a technical correction. Data from the US Treasury Department shows total foreign holdings of US Treasury bonds fell by USD 72.1 billion month-on-month to USD 9.3 trillion. After touching a record high in February this year, foreign holdings have declined in three out of the past four months. The ongoing de-dollarisation trend and US Treasury sell-off form structural support for gold, yet also add complexity to the market.

Short-term gold market outlook: spot gold faces resistance at $4,495.00 per ounce, with support seen at $4,225.00 per ounce.

Spot Gold Daily Chart

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