On August 11, international spot gold experienced a strong rally, briefly breaking through the key $4,400 per ounce mark during the session to hit a two-month high of $4,435.25 per ounce. However, the price action proved volatile, as gold sharply reversed course in the afternoon, exhibiting a classic pattern of a spike followed by a pullback. What is driving this rebound, and what signals does the volatile price action send? Analysts are interpreting the logic behind the short-term fluctuations against the backdrop of shifting Federal Reserve policy expectations and geopolitical risks, while cautioning investors against chasing highs.
According to Chen Mengyun, an analyst at Shenyin & Wanguo Futures, the core driver of this gold rebound is the significant easing of pressure from a strong US dollar and high interest rates, which had previously been a major headwind. The weaker-than-expected US July non-farm payrolls data cooled market expectations for a September rate hike, pushing the US dollar index and US Treasury yields lower. This was compounded by the US and Japan's coordinated intervention in the currency market to boost the yen, which further pressured the dollar. Additionally, the easing of geopolitical tensions between the US and Iran led to a sharp drop in oil prices, lowering inflation expectations and further reducing the incentive for the Fed to raise rates. The sensitivity of gold prices to real interest rates is declining, with the repricing of US dollar creditworthiness becoming the core pricing theme once again.
Wang Zheng, General Manager of Shangyi Fund, noted that gold's return to $4,400 is the result of multiple factors. Uncertainty over the resumption of normal navigation in the Strait of Hormuz, coupled with rising oil prices, has reignited safe-haven demand. Moreover, market expectations for cooling US inflation have reduced the pressure for further monetary tightening, which supports gold. The price also underwent a significant correction from its year-to-date highs, prompting some investors to buy back in. Regarding the afternoon pullback, Wang Zheng attributed it to profit-taking after the rapid breakout above $4,400, as well as caution ahead of the US CPI data release.
Chen Mengyun emphasized that the sustainability of this rally needs further confirmation from fundamental data. The market is now awaiting the July US CPI data to confirm if the disinflation trend can continue. The pullback after breaching the $4,400 level is a technical profit-taking move following the breakthrough of a key resistance level. Before the September Fed meeting, the interest rate path remains uncertain, with gold likely to trade in a high-range volatility. If future employment and inflation data continue to weaken, it could lower rate hike expectations and open up new upside for gold. Over the long term, rising geopolitical risks, increasing US fiscal pressure, the steady progress of de-dollarization, and central banks' ongoing gold purchases support the long-term trend of a higher gold price center.
Zhang Pengyuan, a researcher at PaiPaiWang Wealth, believes the market's focus has shifted to the upcoming US CPI and PPI inflation data. If inflation exceeds expectations, rate hike expectations could re-emerge, putting pressure on gold. Conversely, weak data could push gold to test the $4,500 per ounce level. The long-term logic of central bank gold purchases, de-dollarization, and inflation hedging remains intact, but the current rally is more of a "pulse" driven by the repricing of expectations, likely followed by sharp volatility rather than a straight upward trend.
Industry experts overwhelmingly advise retail investors to avoid short-term chasing of highs and instead focus on long-term allocation in the face of volatile gold markets. Chen Mengyun cautioned against blindly chasing the rally, noting the technical pullback pressure after the surge to $4,400. He recommends waiting for a pullback to build positions, incorporating gold into a long-term asset allocation portfolio, strictly managing position sizes, and gradually adding on dips. Wang Zheng pointed out that while gold still has allocation value, investors should not buy in a lump sum above $4,400. Gold's main role in a portfolio is to diversify risk, so it is better suited as a long-term allocation. He suggested investors limit gold to 5% to 10% of their investable assets, buying in batches and rebalancing periodically to reduce timing risk. Existing holders can keep core positions, while new capital should be deployed patiently and avoid leverage. Kang Daozhi, Chairman of Daozhi Investment, said gold is best used as a hedging tool, not for short-term leveraged speculation. He recommends capping gold allocation at 5% to 10% of total assets, starting with a small position at current highs, and gradually adding on a pullback to around $4,200 per ounce, using instruments like gold ETFs or bank accumulation plans, while strictly avoiding leverage.
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