Gold has just crossed a threshold that attracts all eyes. Above $4,400 per ounce, the precious metal benefits from a particularly favorable cocktail: weakness in the American job market, anticipation of a more flexible monetary policy and continued purchases from China. Added to these factors are geopolitical tensions and the rise in oil prices, which are rekindling inflationary fears. Faced with economic and monetary uncertainties, investors and central banks are increasing their exposure to gold.
In brief
- The yellow metal crossed the $4,400 mark to reach a two-month high between $4,434 and $4,435 an ounce.
- The unexpected loss of 23,000 jobs in the United States in July pushes bond yields lower and validates the technical breakout above the 100-day moving average.
- The People’s Bank of China has accumulated gold for the 21st consecutive month, bringing its official reserves to 76.08 million ounces.
- Oil’s 5% rise revives inflation fears and calls into question the usual correlation between energy and precious metals.
US jobs statistics reignite speculation on Fed rates
The release of the latest US jobs report has had a real impact on the precious metals market. Indeed, 23,000 jobs were lost in the American economy during the month of July. This situation has undermined the predictions of many economists. The latter were banking on the creation of around 80,000 new positions. The figures for previous months, revised significantly downwards, largely contributed to this result.
These disappointing labor market statistics quickly forced traders to review their various expectations relating to the Federal Reserve’s monetary policy. By drastically reducing bets that short-term rates are likely to rise, investors have contributed to falling U.S. Treasury bond yields. They thus give significant room for maneuver to gold. The yellow metal then reached an intraday high between $4,434 and $4,435 per ounce. It then soared to $4,467 this evening, a remarkable rise following the summer correction which had brought the price back towards $3,966.
In addition, this rebound allowed the precious metal to significantly exceed its 100-day moving average. This is a signal scrutinized by traders, because it is likely to trigger a wave of complementary acquisitions. On a technical analysis level, falling bond yields can mitigate the opportunity cost of gold relative to debt or cash investments, as it produces no returns. Such a situation may encourage capital to exit bonds.
Thus, all eyes are now on the publication of the next statistics on the consumer price index (CPI) in the United States. This data will determine if this rebound beyond $4,400 can be sustained or if a recovery in yields would invalidate this bullish breakout. The 200-day moving average and the $4,500 threshold are the next major technical targets identified by investors.
To summarize, several key figures to remember:
- The intraday high reached: between $4,434 and $4,435 per ounce;
- The stabilization price: $4,378.50 at noon, then $4,382.43 at 1 p.m. EDT on August 11;
- A low point of the summer correction estimated at $3,966 per ounce.
Buying gold: the People’s Bank of China strengthens its shield in the face of monetary tensions
Like the American macroeconomic environment, the dynamic driven by gold obtains constant institutional support at the level of the People’s Bank of China (PBOC). Indeed, the banking institution of the Middle Kingdom has just extended its gold acquisition program to a 21th consecutive month. This regularity was reflected in the purchase of 20 additional tonnes, or approximately 640,000 ounces, during the month of July.
Thus, the official figures for the gold reserves of China, an influential member of the BRICS alliance, now climb to around 76.08 million ounces thanks to such an inflow. The regular positive flows in Chinese gold-backed ETFs also consolidate such a trend, which supports an alignment between state strategy and the appetite of private investors.
The ultimate attraction of gold for central banks lies in its balance sheet and sovereign neutrality. This is an independent asset. The precious metal does not depend on the signature of any government or monetary issuer. Such quality provides a structural floor under prices even during periods of US dollar strength. Systematic accumulation by major state financial institutions contributes to the reduction of floating supply on the global market. In addition, this trend provides lasting support for the price, without taking into account the daily variations observed on the American derivatives market.
Geopolitical risks in the Middle East and the oil shock
Geopolitical tensions in the Middle East undoubtedly weigh down this monetary picture. Thus, the closure of the Strait of Hormuz and the deterioration of relations between Tehran and Washington raise fears of continued disruptions in energy supplies. Such instability has caused a 5% jump in crude oil prices, fueling the threat of a general rise in production costs.
The economist Peter Schiff spoke on this subject on the social network asserted that “Gold and silver rose today, along with oil’s 5% rise. Precious metals are breaking free from the negative correlation that had recently developed with oil. Gold and oil are expected to rise in tandem as inflation pushes the CPI and bond yields higher, while the US economy weakens with continued job destruction ». Furthermore, he adds: “Gold is now above $4,400. Silver is approaching $66. The market is sending you a signal. Are you listening? ».
A risk of stagflation may therefore emerge from the joint surge in the prices of energy raw materials and those of precious metals. In such a scenario, where economic stagnation is accompanied by a surge in the price index, the Federal Reserve (Fed) would find itself in a dilemma between supporting a faltering job market and combating energy-driven inflation.
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