New market — new drivers for gold

XAU/USD

Key zone: 4,200.00 - 4,300.00

Buy: 4,350.00 (on a strong positive fundamental basis); target 4,600-4,750; StopLoss 4,250.00

Sell: 4,150.00 (on a pullback following a retest of 4,250); target 3,950-3,750; StopLoss 4,250.00

Gold is trading near seven-week highs and is heading for a fourth consecutive session of gains. The reason behind the latest move is somewhat different from the fundamental factors usually discussed. Right now, the market is buying precious metals primarily because investors have begun to worry about a slowdown in the U.S. economy.

Let’s recap:

A weaker ADP report reduces the likelihood of a Federal Reserve rate hike in September, which could provide some relief for non-yielding gold. Gold is still more than 20% below its late-January peak of $5,589.

This is happening because the factors that had previously restrained gold’s advance following the outbreak of the conflict have begun to weaken.

• There are signs that the U.S. labor market is cooling. Following the latest JOLTS data and ahead of new employment figures, investors have begun to worry that the U.S. economy is losing momentum. As a result, expectations for further Fed tightening have declined. If the Fed becomes less aggressive, bond yields could stop rising, the dollar could weaken, and gold would automatically become more attractive.
• A weaker dollar has been the immediate catalyst for the rally in recent days. When the dollar declines, gold becomes cheaper for buyers outside the United States, increasing demand.
• At the same time, capital is returning to safe-haven assets. Investors are beginning to reduce risky positions and shift some of their money into gold and silver. This is a classic response to concerns about an economic slowdown.

But there is another reason that many investors are overlooking. In recent weeks, not only gold but also silver, platinum, and even palladium have been rising. If the market were concerned exclusively about a crisis, gold would be the primary beneficiary. When nearly all precious metals rise simultaneously, it usually indicates that investors are beginning to buy the entire sector.

So, what does this mean?

Of course, the rise in gold prices is also linked to easing tensions in the Middle East. Efforts to restore operations through the Strait of Hormuz are intensifying, although there has still been no tangible result.

Different factors are now driving the gold market. And keep in mind that, according to the World Gold Council, gold ETFs recorded net outflows in June, although cumulative flows for the first half of the year remain positive. The market is currently being supported primarily by short covering, expectations of a new Fed easing cycle, and investors’ belief that the next phase of global liquidity growth will once again support real assets.

In other words, the recent rally has less to do with wars or inflation and more to do with changing expectations for the U.S. economy. The market is beginning to price in the following scenario: U.S. economy slows → Fed becomes more dovish → dollar weakens → real rates decline → precious metals rise. This chain is currently the main driver of the rally.

There are several factors we should focus on now:

• Watch U.S. economic data. First and foremost, pay attention to labor market data, inflation figures, and comments from Fed officials. Any strong macroeconomic data could revive demand for the dollar and put pressure on gold.
• Monitor U.S. Treasury yields and the U.S. Dollar Index (DXY). Declines in both typically support higher gold prices, while a recovery in yields could trigger profit-taking.
• Avoid buying after sharp upward moves. Following a strong rally, a safer strategy is to look for entry points on pullbacks or after confirmation that the price has consolidated above key resistance levels.
• Watch silver and platinum. If the rally continues across the entire precious metals sector, it would provide additional confirmation that the upward trend is sustainable rather than merely a short-term spike in demand.

As long as this macroeconomic picture remains unchanged, the medium-term advantage stays with buyers. At the same time, the probability of elevated volatility increases after such a rapid rally, so new positions should only be opened when confirmed trading signals are present and with strict risk control.

So we act wisely and avoid unnecessary risks.

Profits to y’all!