Gold: A weak dollar fuels the rally

XAU/USD

Key zone: 4,400.00 - 4,550.00

Buy: 4,580.00 (on a pullback following a correction to 4,500); target 4,750-4,850; StopLoss 4,480.00

Sell: 4,350.00 (against a strongly negative fundamental backdrop); target 4,000.00; StopLoss 4,450.00

Gold has entered a phase of accelerated recovery after the August correction and has once again approached the historically significant $4,650 zone. The main drivers remain a weaker dollar, reduced expectations for a Fed rate hike, and growing concerns about the state of the U.S. debt market.

The gold rally is being supported by the traditional combination of a weaker dollar and changing interest-rate expectations, but the current move also has an additional fundamental component.

A reminder:

In early August, gold was trading significantly below current levels, but it subsequently formed a sustained bullish structure. Over the past week, the metal has gained more than 4%, indicating that strong buying demand remains intact. The momentum became particularly strong on August 19 after the U.S. Treasury decided to increase its operations to buy back long-term Treasury bonds.

• The market reaction to the U.S. Treasury’s decision was mixed. Initially, long-term Treasury yields declined and the dollar weakened. But yields then began to rise again, showing that the buyback program itself does not eliminate the structural problems in the U.S. debt market. The 30-year yield had previously climbed to levels not seen since 2007.
• If investors view the Treasury’s intervention not only as a technical operation to improve liquidity but also as an attempt to limit the rise in government borrowing costs, demand could shift toward assets that do not carry U.S. credit risk.
• Analysts are already noting growing interest in gold amid concerns about the country’s fiscal sustainability. This means gold could receive support even if nominal Treasury yields remain elevated, provided the market continues to price in fiscal risks.

Fed rates remain the second key driver. The July Fed minutes showed persistent concerns about inflation, while rising oil prices are creating an additional inflationary risk. Therefore, the market cannot yet completely rule out a more hawkish stance from the U.S. central bank.

The Jackson Hole symposium could provide greater clarity. Investors will assess the first significant signals from Fed Chair Warsh regarding the future direction of monetary policy. Uncertainty surrounding his approach is already increasing the sensitivity of bonds, the dollar, and gold to statements from Fed officials.

For XAU/USD, the key logic remains unchanged: lower expectations for a rate hike and declining real yields create a favorable environment for gold. Conversely, persistently hawkish Fed rhetoric could trigger profit-taking.

The metal is also receiving additional support from continued tensions surrounding Iran. The unresolved conflict is simultaneously increasing demand for safe-haven assets and supporting oil prices, creating a difficult combination for the Fed.

So gold is now reacting not only to individual macroeconomic indicators but also to changes in the balance between inflation, growth, interest rates, and confidence in U.S. fiscal policy.

So, what does this mean?

Some of these concerns have already been priced in, with gold reaching the $4,600 zone. Therefore, the question now is not so much whether gold can recover, but whether the market can consolidate above multi-month resistance. The strategy should now take into account not a breakout of local resistance from below, but the possibility of a new momentum phase after consolidation above $4,600.

As long as the price remains above $4,550, buyers retain the advantage. If the uptrend continues, the optimal tactic is to look for entries on pullbacks rather than aggressively opening long positions immediately after a vertical move toward $4,650. Consolidation above $4,650 would increase the probability of a continued move toward $4,700.

The trend remains bullish for now, but the market is no longer at the beginning of the move and is already in close proximity to key resistance. Therefore, buyers retain the advantage, but positions should be opened with heightened volatility and the risk of profit-taking in mind.

So we act wisely and avoid unnecessary risks.

Profits to y’all!