Gold extended last week's gains and climbed above $4,650 during Asian trading on Monday, reaching its highest level since mid-May. The precious metal built on a breakout above the 200-day simple moving average (SMA) — a widely watched technical indicator — supported by a weaker US dollar and falling bond yields.
The dollar languished near a more than three-month low as markets scaled back bets on an immediate interest rate rise from the Federal Reserve. That shift, prompted by tame US inflation data for July, left the greenback under pressure and made gold — which pays no yield — more attractive to holders of other currencies.
Why gold is rising: lower bond yields and a weaker US dollar
The main driver of Monday's move was the continued weakness in the US dollar. The greenback has struggled to recover after softer-than-expected inflation data cooled expectations for near-term Fed tightening. Markets now see a more than 70% chance that the Fed will raise borrowing costs at least once by the end of the year, but the immediate focus has shifted to the September 15–16 Federal Open Market Committee (FOMC) meeting, where a policy hold is widely expected.
US Treasury bond yields also remained subdued, adding support to gold. The Treasury Department said last Wednesday it would at least double the size of its buyback operations for long-dated government debt starting in September, with Treasury Secretary Scott Bessent indicating the amount could exceed $4 billion per issue. That announcement helped keep yields below a multi-year peak, further reducing the opportunity cost of holding gold.
Technical outlook: breakout above a key moving average
Friday's close above the $4,615–$4,620 zone — which combines the 200-day SMA and the 61.8% Fibonacci retracement of the April–June decline — was seen as a fresh trigger for gold bulls. That breakout has carried the metal to a fresh high for the period, with the moving average convergence divergence (MACD) indicator staying in positive territory and rising, suggesting upward momentum is intact.
However, the relative strength index (RSI) stood at 71.77, signalling overbought conditions that could limit further gains in the short term. If the rally continues, the next resistance is the 78.6% Fibonacci retracement near $4,684.43, above which the cycle high around $4,891.38 becomes the target. On the downside, initial support lies at the 61.8% Fibo level of $4,521.97, reinforced by the 200-day SMA at $4,516.88. Deeper floors are at the 50% retracement of $4,407.86 and the 38.2% level of $4,293.75.
What to watch this week: PCE data and Jackson Hole
Attention now turns to the release of the US Personal Consumption Expenditures (PCE) Price Index on Wednesday, the Fed's preferred inflation gauge. Any deviation from expectations could alter the rate outlook. In addition, Fed Chair Kevin Warsh's speech at the Jackson Hole Symposium will be scrutinised for hints about the central bank's future policy path. These events, along with ongoing geopolitical risks — including the announcement of tougher US sanctions on Iran and Tehran's threat to halt oil exports through the Strait of Hormuz — could provide further direction for the dollar and gold.
Key takeaways
- Gold rose above $4,650 during Asian trading, its highest since mid-May, after breaking above the 200-day SMA.
- A weaker US dollar and lower Treasury bond yields, driven by fading expectations of a near-term Fed rate hike, are supporting the rally.
- Technical indicators show overbought conditions (RSI at 71.77), which may limit upside, while key support lies at the 200-day SMA near $4,517.
- This week's PCE data and Fed Chair Warsh's Jackson Hole speech are the main fundamental catalysts to watch.
Common questions
What is the 200-day simple moving average?
The 200-day SMA is a widely used technical indicator that smooths price data over 200 trading days, giving traders a view of the long-term trend. A break above it is often seen as bullish.
Why does gold react to the US dollar and bond yields?
Gold is priced in dollars, so a weaker dollar makes it cheaper for buyers using other currencies. Lower bond yields reduce the opportunity cost of holding gold, which offers no yield, making it more attractive compared to interest-bearing assets.
What is the Jackson Hole Symposium?
The Jackson Hole Symposium is an annual economic policy conference hosted by the Federal Reserve Bank of Kansas City. Central bankers and policymakers often use it to signal future monetary policy moves, making it a key event for financial markets.
Gold's latest push higher reflects a combination of technical strength and supportive fundamentals. The breakout above the 200-day SMA has given bulls fresh confidence, but the overbought RSI suggests that a pullback or consolidation is possible before the next leg higher. For live updates on the precious metal, see the live gold price.