Gold pauses after powerful four-day rally

Gold steadied after a four-day rally that lifted prices by around USD 350, with some consolidation emerging after the metal hit a fresh three-month high near USD 4,700 during the Asian session. The limited weakness so far today appears primarily driven by profit-taking following the sharp run higher, together with a continued recovery in the dollar. The Dollar index has now recouped more than half of the losses suffered following last week’s US Treasury buyback announcement. The greenback received additional support after Treasury Secretary Bessent said the US would seek to cut Iran off from the global financial system, underscoring the dollar’s central role in global trade and finance while also reinforcing its traditional haven appeal.

Investor demand has strengthened noticeably. So far this month, total gold ETF holdings have risen by around 60 tonnes, putting August on track for the strongest monthly inflow since last September, while hedge funds have boosted their net long position in COMEX gold futures to an 11-month high, and as per the chart below the highest since January if we broaden the focus to include the "Other Reportables" category. Both developments highlight how renewed momentum, a technical breakout and heightened political, fiscal and financial concerns can quickly translate into stronger demand for bullion.

The drivers that have brought traders and investors back to gold have not gone away and are likely to remain supportive in the coming months. These include concerns about US fiscal sustainability and elevated debt levels, the prospect of renewed dollar weakness, central-bank demand and continued geopolitical uncertainty. In the near term, however, attention may shift towards consolidation, with bond-yield developments and signals from the upcoming Jackson Hole symposium likely to provide direction.

After such a rapid advance, an orderly rally would arguably be healthier than another sharp acceleration. It allows investors and traders to build or reduce exposure without having to chase the market higher. Vertical moves tend to encourage hurried decision-making, while also increasing the risk of positioning becoming stretched and triggering a sharper correction when momentum eventually fades.

From a technical perspective, resistance is seen around USD 4,770, an area that combines the 50% retracement of the January-to-June correction with the May local highs. Initial support is at the 200-day moving average, currently around USD 4,519, followed by USD 4,410.