18.08.202609:46 Forex Analysis & Reviews: Two Headwinds Have Passed: Why Gold Stabilized Around $4400

Today, gold has slightly decreased by 0.4% to $4,396.58 per ounce, holding on to most of the 1.5% increase from the previous two sessions. Silver fell by 0.8% to $65.29, while platinum and palladium also retreated.

The key factor supporting the metal has been the reduction in expectations of a Federal Reserve policy tightening. Following a series of weaker economic data from the U.S., swaps no longer fully price in another rate hike by the end of the year, whereas just a week ago, such a scenario was considered almost assured. The weakening dollar automatically makes dollar-denominated gold cheaper for most buyers.

Meanwhile, the yield on 30-year U.S. Treasury bonds reached a near two-decade high, reflecting investor concerns about rising government spending, a flow in long-term bond issuance, and inflation. This creates an unusual but potentially supportive environment for gold, as investors view the metal as a hedge against the rising debt burden of governments. Typically, rising yields pressure gold through the opportunity cost of holding non-yielding assets; however, when the reason is doubt about the sustainability of government finances, the metal benefits as a safe-haven asset.

Nevertheless, the risk of monetary tightening, which is traditionally negative for non-yielding gold, has not disappeared, as the prospects in the Middle East remain unclear. Against the backdrop of renewed hostilities in Lebanon, President Trump stated that he is not interested in extending the temporary truce with Iran that was signed in June. Tensions around the Strait of Hormuz persist, and this key shipping route continues to operate intermittently due to attacks on vessels.

The upcoming two events will be key for traders. On Wednesday, the minutes from the July FOMC meeting will be released, which should clarify the future trajectory of rates and the depth of the divide within the committee, where three members advocated for an immediate hike. Later this month, close attention will be paid to Chairman Kevin Warsh's speech at the FOMC's annual symposium in Jackson Hole, where the new head of the central bank will make his first address in this capacity.

Regarding the current technical picture of gold, buyers need to break the nearest resistance at $4,432. This will allow targeting $4,481, above which it will be quite challenging to break through. The furthest objective will be around $4,546. In the case of a decline, bears will attempt to take control at $4,372. If successful, breaking the range will deal a serious blow to bullish positions and push gold down to a low of $4,304, with the potential to reach $4,249.