Gold rallies: Long-awaited rise and growing safe-haven demand

Gold rose to 4,400 USD per ounce on Tuesday, reaching a two-month high. Demand for the precious metal is growing rapidly, even amid heightened inflation risks and expectations of higher interest rates driven by elevated oil prices.

Chinese institutional investors continue to build positions in gold as a defensive asset amid heightened volatility in other markets. China’s gold-backed ETFs are recording their longest run of inflows in months.

The People’s Bank of China is also supporting the market. In July, the regulator increased its gold reserves by approximately 20 tonnes, following an increase of around 15 tonnes in June – the largest monthly addition since October 2023.

At the same time, uncertainty persists around a potential US–Iran agreement that could end the conflict and reopen the Strait of Hormuz. Investors are also awaiting key US inflation data this week, which could shift expectations for future Federal Reserve policy.

Technical analysis

On the H4 XAU/USD chart, the market formed a consolidation range around the 4,341 USD level and, following an upside breakout, moved higher to 4,435 USD. A consolidation range is now forming below this level. A move lower towards 4,370 USD is expected next, with a possible extension to 4,340 USD. A further rise towards 4,575 USD is anticipated as the local upside target. The MACD indicator signals the early stages of bearish momentum, with its signal line above the centre line at recent highs and beginning to turn downwards.

On the H1 chart, the market broke above the 4,371 USD level and moved higher to 4,435 USD, followed by a correction to test 4,371 USD from above. A broad consolidation range is forming around 4,371 USD. A move higher towards 4,460 USD is expected, followed by a decline to 4,371 USD. The Stochastic oscillator confirms this scenario, with its signal line below 50 and pointing downwards towards 20, indicating increasing short-term downside pressure.

Conclusion

Gold has rallied to a two-month high, driven by robust demand from Chinese institutional investors and the People’s Bank of China’s continued reserve accumulation. Despite rising inflation risks and expectations of higher interest rates, the metal’s appeal as a defensive asset has strengthened amid market volatility. Uncertainty over a potential US–Iran agreement and the outlook for the Strait of Hormuz, along with upcoming US inflation data, continues to keep markets on edge. Technically, gold may see a short-term pullback towards 4,340–4,370 USD before potentially resuming its uptrend towards 4,575 USD. The metal’s near-term direction will depend on geopolitical developments and US monetary policy expectations.