Gold (XAU/USD) experienced a pause near its three-month high after a sharp rally, with the price reaching $4,697 earlier in the Asian session before retreating to around $4,640 as traders booked profits. The Relative Strength Index (RSI) entered overbought territory, signaling the potential for a short-term pullback. The modest recovery in the US Dollar, with the Dollar Index (DXY) trading around 99 after hitting a low of 98.56 last week, also limited demand for the USD-denominated metal [1].
Despite the pullback, the downside for gold appears limited due to supportive macroeconomic and technical factors. TD Securities highlighted that the US Treasury's intervention, which could see Treasury purchases more than double to $8 billion between September 9 and November 4, has fueled demand for gold and silver. Concerns about America's fiscal situation have revived the USD debasement narrative, further energizing gold buyers [1].
Demand for gold-backed exchange-traded funds (ETFs) strengthened, with World Gold Council data showing global gold ETFs attracted net inflows of $3.52 billion (23.6 tonnes) in the previous week. Year-to-date inflows now total $21.34 billion (116.1 tonnes), driven by strong demand from Asia and Europe [1].
Geopolitical developments in the Middle East continue to add volatility, with Iranian Finance Minister Ali Madanizadeh stating that Tehran is "fully prepared" to counter US sanctions following the US Treasury's launch of "Operation Economic Outcast." However, oil prices showed little reaction, with West Texas Intermediate (WTI) down nearly 3.5% on the day but still above pre-war levels, maintaining energy-driven inflation risks and uncertainty around the Federal Reserve's interest-rate path [1].
Looking ahead, traders are focused on the upcoming US Personal Consumption Expenditures (PCE) Price Index release on Wednesday and Fed Chairman Kevin Warsh’s speech at the Jackson Hole Symposium on Friday. Technically, XAU/USD maintains a bullish structure, trading well above its 50-day, 100-day, and 200-day Simple Moving Averages [1].
CONCLUSION
Gold's recent rally to a three-month high has prompted profit-taking and a modest pullback, but supportive macroeconomic factors and strong ETF inflows suggest continued investor interest. Market participants are closely watching upcoming US economic data and Federal Reserve commentary for further direction.