Gold Breaks Key Level; Bullish Momentum Continues

Gold prices extended their gains during Monday's US trading session (August 17). XAU/USD traded around US$4,419 per troy ounce after briefly touching approximately US$4,428. This level is significantly higher than the previous close of around US$4,377, indicating that buyers have regained control of momentum after gold had previously stalled below US$4,400.

Gold's rally continues to be primarily supported by a weakening US dollar. The Dollar Index stood at approximately 99.41, down about 0.26% and nearing multi-month lows. The dollar came under pressure after US Retail Sales and Consumer Sentiment data showed weakness, while last week's inflation data remained relatively contained.

This series of US data has led the market to further scale back expectations for a Federal Reserve interest rate hike in September. The probability of a Fed hike now stands at only around 31%–33%, down significantly from roughly 50% the previous week. Reduced risk of a rate hike acts as a positive factor for gold, as it lowers the opportunity cost of holding non-yielding assets.

However, inflation risks stemming from the

However, inflation risks stemming from the Middle East have not entirely vanished. US-Iran tensions and disruptions to shipping through the Strait of Hormuz continue to keep energy prices elevated. This situation presents a double-edged sword for gold: while conflict can boost safe-haven demand, a sharp spike in oil prices could reignite inflationary pressures and prompt the Fed to maintain a hawkish stance.

Market focus now shifts to the minutes of the Fed's July meeting, due for release on Wednesday. The document will be closely watched to gauge the extent of internal disagreement regarding the need for rate hikes, following the previous decision to leave policy unchanged.

Newsmaker Analysis: Gold's successful break back above US$4,400 reinforces short-term bullish momentum. As long as the price holds above this area, immediate resistance lies around US$4,428–US$4,450. A decisive break above that zone would open the door for further gains. Conversely, a failure to hold the US$4,400 level could trigger profit-taking towards the US$4,380–US$4,370 range before the market receives a new catalyst from the Fed. (arl)

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