$4,350 and US NFP in focus: Gold bulls tighten grip on Hormuz reopening hopes
- Gold briefly tests $4,300 early Thursday, hitting the highest level in seven weeks.
- The US Dollar holds the downside on Strait of Hormuz reopening hopes, fading Fed rate hike bets.
- Gold reclaims 50-day DMA above $4,160 on Wednesday; the daily bullish RSI points to more upside.
Gold is extending the previous big breakout, briefly testing the $4,300 level for the first time in seven weeks in the Asian session on Thursday.
Gold cheers Strait of Hormuz reopening hopes
Nothing seems to have changed fundamentally for Gold since a day ago, as hopes for the reopening of the Strait of Hormuz are coming to life after Iran said on Wednesday that it is close to finalizing a proposed framework for commercial shipping through the Strait with Omar, per The Guardian.
The optimism around the reopening of the vital waterway in the Gulf eases supply disruption concerns and keeps Oil prices mired in three-week lows.
Weakening Oil prices alleviate inflation worries, prompting markets to scale back their bets on a US Federal Reserve (Fed) interest rate hike in September.
Markets are pricing in a roughly 55% chance that the Fed will raise rates in September, down from about 60% a day ago, according to the CME Group’s FedWatch Tool.
That’s exactly what is weighing on the US Dollar (USD), while boosting non-yielding assets such as Gold.
Earlier on, Fed's Daly delivered a moderately cautious message, with a FXS Speechtracker score of 5.4/10, slightly softer relative to the historical average of 5.6/10. Daly highlighted that tariffs had a clear impact on inflation but now show signs of fading, while technology investment is currently adding upward pressure, and supply shocks are seen as largely temporary with longer-run inflation expectations still well anchored but not to be taken for granted. The tone leans toward balanced risk management, supportive of holding rates steady while emphasizing data dependence and the evolving mix of supply-side forces.
The FXS Fed Sentiment Index fell by 2.23 points to 138.69, signaling a modest pullback in perceived hawkishness following the speech. Despite the decline, the index remains firmly in hawkish territory above 100, indicating that markets still see the Fed as biased toward tighter policy even as the tone cools slightly compared to recent communications.
Further, disappointing US ADP jobs and headline ISM Services PMI data continue to undermine the USD and Fed rate hike odds, keeping Gold price upside going strong.
The ADP said on Wednesday that US private sector employment increased by 44,000 jobs in July, against a growth of 70,000 jobs expected. Meanwhile, the ISM Services PMI came in at 54.1 in July, but missed the forecast of 54.5.
Looking ahead, all eyes will remain on the Middle East developments, especially after Israel launched attacks in southern Lebanon after accusing Hezbollah of violating the ceasefire.
The Mideast situation remains fragile also after Yemen’s Iran-aligned Houthi rebels said they targeted a Saudi oil tanker in the Red Sea as part of their naval blockade of Saudi Arabia.
If the Gulf conflict re-escalates, hampering the Strait of Hormuz reopening deal, Gold could see a steep correction toward the $4,150 demand area.
However, the daily technical setup suggests that more upside remains in the offing, as traders brace for Friday’s US Nonfarm Payrolls (NFP) release.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,274.80. The metal holds a bullish near-term bias as it trades above the 21-day and 50-day simple moving averages (SMAs) at $4,078.38 and $4,157.48, while the 100-day SMA at $4,393.96 and the 200-day SMA at $4,493.07 still loom overhead as medium-term caps. The Relative Strength Index (14) at 61.94 shows firm positive momentum, hinting that buyers retain control though conditions are edging toward overbought territory.
On the topside, initial resistance is located at the 100-day SMA near $4,394, followed by the 200-day SMA around $4,493, where a break would open the way for a stronger extension of the bullish trend. On the downside, immediate support is seen at the recent price pivot around $4,275, ahead of the 50-day SMA at $4,157 and the 21-day SMA near $4,078; a deeper slide could revisit the rising trend-line support drawn from $3,951, where buyers would be expected to re-emerge.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold positioning shifts as TD Securities flags renewed macro support
According to TD Securities, "macro headwinds being pushed out on the horizon, along with US-Iran deal hope, have put some major wind in the precious metals sails." Strategists at the bank note that, when "decomposing managed money gold positions," macro discretionary funds "have more than doubled their positions since June," acting as consistent dip buyers and "protecting the $4000/oz level." TD Securities adds that "the momentum generated from these cohorts' renewed appetite is now forcing CTAs to turn heavy buyers, exaggerating the move to the upside," as systematic accounts are drawn into the rally by the improving trend in positioning.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
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