Gold staged a powerful rally in overnight trading, emerging as the standout asset across the board.
During the session, spot gold hit an intraday high of $4,328.20 per ounce, closing at $4,308, marking a single-day gain of 4.20%, or $173.80. This was the largest single-day increase in five months. The move not only broke through a descending triangle pattern that had suppressed prices for more than six weeks but also pushed above the 20-day and 50-day moving averages, fully triggering bullish technical signals.
This rally was driven by a combination of catalysts. Trump's latest remarks on reopening negotiations over the Strait of Hormuz ignited market expectations of a geopolitical risk premium. Meanwhile, second-quarter global central bank gold reserve data showed an unexpected expansion, with the Bank of Korea resuming gold purchases after a 13-year hiatus, further reinforcing confidence that central bank demand will continue to provide a floor for prices. Significantly, the gold price surge was accompanied by a notable cooling of Fed rate hike expectations—the CME FedWatch tool showed the probability of rates remaining unchanged in September rising to 45%, the highest level in over a month.
Bullish momentum for gold is rebuilding. The triple confluence of a technical breakout, central bank buying, and shifting macroeconomic expectations has brought the next key resistance level of $4,400 into view.
Trump's Comments Spark Geopolitical Risk Premium
The immediate trigger for this gold rally came from Trump's latest comments on the Strait of Hormuz. According to Xinhua, citing Axios, regional sources and US officials indicated that the US, Iran, and Oman are "close to reaching" a temporary agreement to reopen the Strait of Hormuz, with the US hoping to announce the deal on the 5th.
The report stated that Trump said Iran is actively negotiating to reopen the Strait of Hormuz. Under the proposed arrangement, Iran would manage ships entering the strait via the northern route, while Oman would oversee ships exiting via the southern route. An initial 60-day free transit period would be established, with the possibility of further extension.
This statement is not without substance. Iran has publicly stated it is not negotiating directly with the US but is instead consulting with Oman, which has long served as a mediator between Washington and Tehran, regarding the reopening of the waterway. The Strait of Hormuz handles approximately 20% of global seaborne oil traffic, accounting for about 15% of total global oil sales, making its status a major factor for global energy markets.
The escalation of geopolitical narratives has provided short-term safe-haven support for gold and served as a key trigger for this breakout.
Central Bank Buying Sets Record, South Korea Returns After 13 Years
Beyond geopolitical factors, the structural shift in central bank demand offers a more long-term support for the current bullish gold narrative.
According to the World Gold Council, global central banks purchased 288.9 tonnes of gold in the second quarter, a 62% year-on-year increase, marking the strongest second quarter on record. Poland led with purchases of 51 tonnes, pushing its total reserves to a record high of 632 tonnes, with a target of 700 tonnes. Polish central bank governor Adam Glapiński stated, "We have been consistently buying gold, taking advantage of the recent price pullback." China added 33 tonnes, continuing its long-term buying pattern.
The most market-moving development was the Bank of Korea resuming gold purchases after a 13-year hiatus. Seoul stopped buying gold in 2013, which coincided with a sharp decline in prices, subjecting the central bank to significant paper losses and even requiring the governor to testify before parliament. However, history has vindicated the decision. The 90 tonnes of gold purchased by South Korea at an average of $1,629 per ounce is now worth approximately $11.8 billion, representing a gain of about $7 billion from the initial cost.
The Bank of Korea's renewed purchase plan is modest in scale, aiming to buy only 4 to 5 tonnes annually from the by-products of domestic copper and zinc smelting, keeping total reserves around 104.4 tonnes. However, its symbolic significance far outweighs the actual volume—it signals that economies previously absent from the gold market are re-entering. Jung Hee-sub, head of the Bank of Korea's reserve management department, stated that the purchase decision was not based on a specific price assessment but was made after a comprehensive evaluation of domestic and international gold prices and market conditions.
Rate Hike Expectations Cool, Technical Signals Fully Confirm Bullish Trend
In addition to the geopolitical and central bank narratives, the marginal shift in Fed policy expectations provided a supportive macro backdrop for this gold rally.
The CME FedWatch tool showed market expectations for the Fed to keep rates unchanged in September rose to 45%, the lowest level for rate hike expectations in over a month. The cooling of rate hike expectations reduces the opportunity cost of holding gold, further opening the upside for prices.
Technically, this breakout was also significant. Gold not only effectively broke out of the descending triangle pattern that had constrained it since June 22 but also moved above the 20-day and 50-day simple moving averages—the latter being breached for the first time since March. Bloomberg strategist Cameron Crise noted that while gold surged over 4% in a single day, its traditional driver model suggests gold "should have" fallen slightly, implying that the rally contains additional momentum beyond standard explanations.
Looking ahead, the next target for the bulls is around $4,400, an area that closely aligns with historical turning points from November to December 2025 and is also near the 23% Fibonacci retracement of the decline from the all-time high to the recent low of approximately $4,020. If bullish momentum fades, initial support levels to watch include the 50-day moving average at $4,243, the $4,200 psychological level, and the former descending trendline now acting as support around $4,070.
Deutsche Bank analysts Michael Hsueh and Bryant Xu project a year-end gold target of around $4,700, while JPMorgan, even after revising its forecast lower, still expects an average of $4,500 in the fourth quarter. The World Gold Council, in its mid-year outlook, took a more conservative stance, suggesting gold will trade in a range of 5% around $4,100 if the macro environment does not change significantly. Analysts also note that central bank buying primarily plays a "supporting" role rather than acting as a primary driver of substantial price increases—a sustained bull market still requires a broad return of retail investors and funds.
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