In August, the price of gold rose by 9% to about $4,400 per ounce, indicating that the precious metal is once again attracting institutional investors and central banks. This creates conditions for further price increases as markets gradually recover from the initial shock caused by the war between the U.S. and Israel against Iran, according to Reuters.
The war, which began in late February, led to a decline in gold prices from a record $5,595 per ounce in January to below $4,000 in June. Investors sought to maintain liquidity, while some central banks used their reserves to support national economies amid rising oil prices.
“It seems that gold has finally been freed from its constraints,” said independent analyst Ross Norman.
In August, the price of gold surpassed two key levels of technical resistance. The market was supported by falling oil prices and weaker-than-expected inflation data in the U.S., which reduced expectations for further interest rate hikes.
“If oil does not come back to the forefront, the situation in the Middle East does not worsen, and oil prices do not spike, then it seems the path for gold is open for further growth,” said James Steel, chief precious metals analyst at HSBC.
According to Steel, the strength of price recovery over the past two weeks indicates possible activity from central banks or sovereign funds. At the same time, the analyst emphasized that this is an assumption, not a confirmed fact.
Demand from Central Banks
Another potential source of support for gold has become institutional demand for large bars. On Asian trading platforms, including in China, gold insurers report a revival of buying interest. Last week, the insurance on gold in China was $1.50 per ounce.
“In my opinion, this is really about the restoration of positions that large institutional investors held before the conflict with Iran,” noted Steel.
At the same time, further growth in gold is hindered by the slow progress of negotiations to end the war with Iran, weak demand for jewelry and investment coins, as well as inflows into exchange-traded funds (ETFs) that are sensitive to changes in gold prices and interest rates.
According to the World Gold Council, in the first half of August, assets under management of such funds increased by only $7 billion, reaching $582 billion.
Technical indicators also point to potential growth limitations. The Relative Strength Index (RSI) indicates that gold is approaching a short-term “overbought” zone. Additionally, the 200-day moving average, currently at $4,504 per ounce, continues to remain a strong resistance level.
