Gold's Rise Continues Amid Central Bank Purchases

Gold prices ended last week’s trading session lower, marking its second consecutive weekly loss, and closed at $4,430 per ounce. The decline was driven by stronger-than-expected U.S. jobs data, which reinforced expectations of a tight U.S. monetary policy.

A report issued yesterday by Kuwait Mint Company stated that U.S. non-farm payroll data was the primary factor influencing gold’s movement last week. The U.S. economy added 162,000 jobs in August, significantly surpassing market expectations of around 56,000. Meanwhile, July’s data was revised upward to show an increase of 21,000 jobs. The report added that the unemployment rate remained steady at 4.1%, while annual wage growth slowed to 3.1%, though this decline was less than market forecasts.

It noted that U.S. Treasury yields rose following the jobs data, with the 10-year yield touching 4.81% before later retreating to approximately 4.77%.

From a technical perspective, the report highlighted that gold ended last week near $4,430 per ounce, keeping the $4,400 level as the key pivot for the current phase. It suggested that if gold manages to hold this level and reclaim $4,450, attention may shift toward $4,500, followed by the $4,520 and $4,534 zones, which represent important technical resistance. Conversely, if the $4,400 level breaks and holds below, the risk of a continued correction toward $4,354 and then $4,322 increases. In the event of a deeper market downturn, $4,282 would serve as a major technical support level.

In a related development, Muhammad Salah, Head of Operations at Kuwait Mint Company, stated that gold’s upward trend continues, supported by central bank purchases. He emphasized that a clearer rise was anticipated following entry signals from Exchange-Traded Funds (ETFs), which materialized in August through purchases exceeding 40 tons.

Salah explained that the coming phase will witness a significant shift as individual investors enter the gold market more substantially, following the initial influx of investments via ETFs. This trend is expected to lead to wide price volatility, with potential gains ranging between 4% and 5% within one or two trading sessions. He added that continued inflows into these funds will attract more individual investors, thereby intensifying price movements.

He affirmed that gold is poised to maintain its positive performance in the near future, with the Federal Reserve’s upcoming meeting remaining the most influential factor on price direction.

Regarding central bank purchases, he noted that the World Gold Council’s Q2 report showed strong buying activity, with the People’s Bank of China purchasing over 40 tons according to disclosed data, alongside potential undisclosed purchases in the off-market segment in larger volumes. He also confirmed that government sovereign wealth funds executed large-scale purchases without disclosure, clarifying that central bank purchases reached 289 tons in the second quarter after adjustments to Q1 data.

He stressed that the lack of transparency in purchase disclosures significantly impacts market clarity, as regular data from ETFs provides investors with a clearer view compared to central bank and jewelry purchases, which rely on periodic reports. He indicated that gold is heading toward the $4,700 per ounce level in September, while emphasizing that this view does not constitute investment advice.