International gold prices have experienced a roller‑coaster ride. Over the week starting August 19, London spot gold surged from around $4,300 per troy ounce to nearly $4,700 per troy ounce. Then, hit by hawkish remarks from Federal Reserve Chair Wash at the Jackson Hole Economic Symposium, gold prices reversed sharply and corrected consecutively toward the $4,400‑per‑troy‑ounce level.

On August 31, London gold extended its decline, briefly breaking below the $4,400‑per‑troy‑ounce threshold during intraday trading before staging a partial rebound. At press time for the Shanghai Securities News, London gold edged down 0.13% to $4,447.86 per troy ounce.

Bullish positions have suffered a sharp blow. Has gold’s rally lost momentum? Has the market’s pricing logic shifted?

“Gold prices face solid resistance near the $4,700‑per‑troy‑ounce mark in the short term,” a trader told reporters. Fund‑flow data points to mounting selling pressure in the gold market last week. As of August 28, holdings of SPDR Gold Trust, the world’s largest gold‑backed exchange‑traded fund (ETF), stood at 1,042.35 tonnes, representing a total outflow of 4.85 tonnes, or a 0.46% week‑on‑week drop.

The gold price correction largely stems from the full pricing‑in of short‑term positive catalysts. Liu Yu, Chief Economist at Industrial Securities, noted in a research report that U.S. non‑farm payrolls, CPI and PPI readings have softened successively since August. The CME FedWatch Tool put the probability of a September interest‑rate hike at roughly 30%, meaning the boost from fading tightening expectations has been largely priced in.

Meanwhile, after retreating from above 101, the U.S. Dollar Index found support near 99 and edged higher in successive sessions, sapping the tailwind for gold from U.S.‑dollar‑depreciation trades.

Another factor lies in subdued positioning built amid low volatility, with no major build‑up of directional bullish bets. According to the aforementioned trader, gold traded in a prolonged low‑volatility range from June through early August. After the breakout, trend‑following capital chased the rally without amassing excessive directional long positions.

The real blow to gold came from Wash’s hawkish speech at Jackson Hole. He reaffirmed the 2% inflation target and warned that the Fed “has more work to do” if inflation fails to fall toward the target “clearly and sufficiently quickly”. Even before the symposium kicked off, some investors had already stepped aside to adopt a wait‑and‑see stance.

Analysts commented that Wash’s remarks reinforced market expectations for sustained restrictive Federal Reserve monetary policy and weighed on gold prices.

Markets had previously hoped for dovish signals from the Fed that would reopen valuation room for non‑yielding assets, only to receive expectations of “higher‑for‑longer” interest rates instead.

The U.S. August non‑farm payrolls report, due for release on September 4, may serve as a critical variable. It will be the final employment print ahead of the Federal Reserve’s September policy‑setting meeting. Market participants believe strong data could further lift bets on an interest‑rate increase.

Zhou Junzhi, Chief Macro Analyst at CITIC Securities, highlighted three sets of signals worth monitoring in subsequent periods. First, whether the U.S. labor market keeps cooling, prompting a policy pivot from inflation back toward employment. Second, whether inflation remains contained and if the Fed is prepared to tolerate a certain degree of energy‑driven inflation. Third, whether North American gold ETFs shift from tentative inflows to sustained trend‑based net buying. Combined, these factors will determine whether easing expectations translate from market conjecture into actual policy shifts and capital flows.

“Non‑farm payrolls are not the only metric; other U.S. economic indicators also merit attention. Inflation remains quite sticky. What matters is whether economic data weakens and thereby dampens rate‑hike expectations,” the trader said. Should economic slowdown coincide with stubborn inflation, the market could enter quasi‑stagflation territory, a backdrop that would benefit gold.

Nevertheless, Zhou Junzhi argued that looking past short‑term inflation and employment figures, Federal Reserve policy is fundamentally oriented toward safeguarding core interests of the U.S. economy and financial system. Amid ongoing tech‑sector competition, the medium‑to‑long‑run bias toward looser rather than tighter monetary policy means gold’s current upward cycle is not over.

“The worst may be behind gold,” the Office of the Chief Investment Officer at DBS Bank stated. For one thing, adaptive capacity in energy markets helps contain macro‑level inflation risks. For another, gold demand has strengthened at around $4,000 per troy ounce. Lastly, surging long‑dated government bond yields across major economies could revive gold’s appeal as a hedge against currency depreciation.

DBS Bank also holds that gold will likely stay range‑bound as markets continue to assess U.S.‑Iran tensions, U.S. inflation dynamics and Federal Reserve monetary policy.

Source: Shanghai Securities News