Gold Retains Upside Catalysts as Global Risks Enhance Its Appeal

Gold prices ended last week’s trading session lower, recording its first weekly loss after three consecutive weeks of gains. Gold closed on Friday at $4,454 per ounce, down more than 3% on a weekly basis.

A report issued by Kuwait Mint Company stated that the decline followed a shift in US monetary policy expectations after comments by Federal Reserve Chair Jerome Powell, which took a tougher stance on inflation. The report clarified that Powell’s speech marked a key turning point in gold’s movement, as he emphasized that core inflation has not declined sufficiently over recent months. He added that the Federal Reserve still has work to do if policymakers are not convinced that inflation is clearly moving toward the central bank’s 2% target.

The report noted that these remarks led to increased expectations of an interest rate hike in September, which quickly impacted the US dollar and Treasury yields, putting pressure on gold prices. It pointed out that US Treasury yields rose, particularly for two-year maturities, following Powell’s speech, while the yield on ten-year bonds approached 4.7%. The rise in yields contributed to an increase in the opportunity cost of holding gold, a non-yielding asset, coinciding with a stronger US dollar.

The report stated that the dollar index rose last week against other major currencies, increasing pressure on dollar-denominated gold and making the metal more expensive for buyers holding other currencies.

Despite the decline, the report highlighted that gold continues to benefit from supportive factors in the medium and long term, most notably concerns regarding US public finances and rising debt levels, alongside geopolitical risks and sustained investment demand for precious metals. It explained that worries about US debt and financial instability remain long-term supportive factors for gold.

Technically, the Kuwait Mint report stated that gold fell below its 200-day moving average near $4,526 per ounce, signaling the market’s entry into a deeper correction phase following the previous upward surge. It noted that the $4,450 level will remain the key pivot point during the week, as maintaining it could allow gold to attempt a recovery toward $4,500, followed by the $4,520 and $4,526 levels.

It added that a break below $4,450 with sustained trading underneath could increase the risk of a decline toward $4,380. Conversely, a move back above $4,550 would provide a more positive signal indicating the end of the correction wave and the return of buyers to the market. The report observed that the recent drop pushed momentum indicators into oversold territory, potentially paving the way for a technical rebound if yields fall or the dollar weakens.

It clarified that market attention this week is focused on US labor market data, headlined by the non-farm payrolls report for August on Friday, along with jobless claims data and industrial and services activity indicators. These data points are crucial in determining the direction of monetary policy during the September meeting, especially given the heightened expectations of a rate hike. The Kuwait Mint report stated that if the data comes in weak, particularly with rising unemployment, rate hike bets may recede, providing gold with an opportunity to rebound from current levels.

It emphasized that gold enters the new week after a strong correction exceeding 3%, under pressure from the rising dollar, yields, and repricing of US interest rate expectations. However, oversold conditions may offer a chance for a technical rebound, with US jobs data expected to be the primary driver of prices. The $4,450 to $4,500 range remains the decisive zone in the coming period.

On the local front, the Kuwait Mint report stated that gold prices in the Kuwaiti market continue to be directly influenced by global ounce movements, alongside dollar fluctuations and changing expectations of US monetary policy. It noted that the price of 24-karat gold gram reached approximately 0.44315 Kuwaiti dinars (about $144), while the 22-karat gram stood at around 0.40620 dinars (approximately $132). Meanwhile, the price of a kilogram of silver reached about 0.716 dinars (approximately $2,333).