International gold prices continued their upward momentum during Tuesday's Asian trading session, with spot gold marking its third consecutive daily gain and its fifth advance in the past six sessions. The precious metal briefly surpassed the $4,400 mark, reaching its highest level since June 5.
The recent rally in gold has been primarily driven by a cooling U.S. job market and a recalibration of Federal Reserve policy expectations. Recently released employment data fell short of market forecasts, indicating that the labor market is gradually softening. This slowdown in job growth has alleviated market concerns about further monetary tightening by the Fed, while simultaneously boosting investor expectations for a future policy pivot. Since gold does not generate interest income, its investment appeal typically strengthens during periods of declining rate expectations.
The weakening U.S. job market has diminished the case for rate hikes and has become a key factor fueling gold's recent rebound. Capital is flowing back into the precious metals market, allowing gold to shake off its earlier correction pressure and continuously test higher levels.
However, gold's advance is not without headwinds. The recent rapid rise in crude oil prices has refocused market attention on global inflation risks. As energy costs can push inflation higher through cost channels, investors are reassessing the trajectory of future Fed policy. The market has not yet fully ruled out the possibility of future rate hikes, which limits the potential for further short-term gains in gold.
Uncertainty surrounding the Middle East remains a significant factor influencing gold's trajectory. The slow progress of related negotiations has lowered expectations for a swift restoration of key energy transport routes. Meanwhile, restrictions on another vital shipping lane are fueling global energy supply concerns and driving crude oil prices higher. Rising oil prices are impacting the gold market through two channels: inflation expectations and interest rate expectations. On one hand, increased risk events typically benefit gold's safe-haven demand; on the other hand, if energy prices lead to a resurgence of inflationary pressures, the Fed may maintain a higher interest rate environment, raising the opportunity cost of holding gold.
The U.S. dollar has also become a key variable for the gold market recently. As the market digests potential policy changes, U.S. Treasury yields remain elevated, helping the dollar index sustain its rebound. A stronger dollar generally increases the cost of purchasing gold, which is priced in dollars, and may therefore limit the yellow metal's short-term gains.
Investors are now awaiting U.S. inflation data to further confirm the policy direction. The upcoming Consumer Price Index (CPI) and the subsequent Producer Price Index (PPI) will serve as important benchmarks for the market to gauge the Fed's next move. If inflation continues to decline, gold could gain further upward momentum; if energy prices push inflation higher, the expectation of sustained high interest rates could be reinforced.
From a market sentiment perspective, gold is currently being supported by both safe-haven demand and changing policy expectations. While short-term headwinds from the dollar and bond yields persist, investor expectations of an economic slowdown and a monetary policy shift provide strong support for the precious metal.
On the daily chart, spot gold has recently re-entered an uptrend structure. After breaking above the $4,400 area, bulls have taken the initiative. Gold has now surpassed its 100-day moving average and the 50% Fibonacci retracement level of the corrective decline from April to June, indicating strengthening buying pressure. On the upside, initial resistance is at the 200-day moving average near the $4,498 level. A decisive break above this could lead to a test of the 61.8% Fibonacci retracement level near $4,515, followed by the 78.6% area around $4,669. On the downside, initial support is near $4,406, with further support at the $4,389 zone. A break below this level could trigger a pullback to the $4,297 area, with more critical support located at the $4,162 region.
On the 4-hour chart, gold maintains a clear short-term uptrend, trading above its short-term moving averages, with market momentum still favoring the bulls. However, after a series of gains, technical indicators suggest that some profit-taking activity is increasing, which could lead to a period of consolidation in the short term. If gold can stabilize above the $4,400 to $4,410 area, the upward trend is likely to continue, with the potential to challenge resistance near the $4,500 level. Conversely, if it falls below support at $4,380, it could enter a short-term corrective phase, with targets in the $4,330 to $4,300 range. Short-term price action will be heavily influenced by the dollar, U.S. bond yields, and upcoming U.S. inflation data.
Summary of Key Points
Gold's recent rise is primarily driven by a combination of a cooling job market, increased safe-haven demand, and shifting expectations for Fed policy. The market is currently trading the contradiction between "economic slowdown reducing rate pressure" and "rising energy prices increasing inflation risk," leaving gold in a phase of high-level, volatile strength. The core determinant of gold's future trajectory will be whether U.S. inflation data supports the prospect of a policy pivot. If the CPI and PPI continue to show easing price pressures, gold could see further upside. However, if energy prices cause inflation to reheat, the likelihood of the Fed maintaining high interest rates increases, and a rebound in the dollar and bond yields could cap gold's performance. In the near term, gold retains upward momentum, but investors should be wary of the risk of volatility at elevated levels.
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