Gold held near a seven-week high on Thursday after recording its strongest session since February, supported by easing energy prices, a weaker U.S. dollar, and declining expectations that the Federal Reserve will raise interest rates in September. Spot gold reached an overnight high of $4,304.31 before giving back part of the advance. At 11:25 GMT, XAU/USD was trading at $4,258.66, up 0.27% on the session. The metal gained about 4.2% on Wednesday, extending a multiday advance and decisively breaking above several key technical levels.
The rally appears to be driven primarily by shifting interest-rate expectations rather than a fresh inflation surge or a conventional flight to safety. The probability of a September rate increase fell to roughly 55% from 67% two days earlier after weaker U.S. private-sector employment data. That shift encouraged investors to return to gold, which becomes more attractive when expected interest rates and bond yields decline.
Lower oil prices were an important part of gold’s advance. Iran and Oman have reported progress toward establishing shipping routes through the Strait of Hormuz, a critical passage for global energy supplies. U.S. officials have also said negotiations are advancing, while stressing that questions remain over the management of shipping routes, transit fees, and the broader security arrangement. President Donald Trump said an agreement was close, although Iran continues to deny holding direct negotiations with Washington. The prospect of restored commercial shipping has pushed crude oil well below last week’s levels, weakening the argument that higher energy costs will force central banks to tighten policy further. That has reduced inflation pressure in bond and currency markets, helping gold.
However, markets are pricing in a favorable outcome before a final agreement has been reached. Tehran is seeking control over vessels entering the Gulf and greater visibility into outbound traffic, creating a managed chokepoint rather than unrestricted passage. Tanker operators and insurers must also determine whether the proposed route is safe enough to support normal shipping volumes. If talks stall and crude rebounds, inflation concerns could quickly return. That would strengthen the case for higher interest rates, support the dollar, and create renewed pressure on gold.
Wednesday’s ADP report showed that hiring by U.S. private companies slowed sharply in July, with much of the job growth concentrated in healthcare. The weaker reading reduced expectations for a September Fed rate increase and helped gold maintain momentum following its breakout.
The ADP figures are not considered decisive for monetary policy, however. Investors are now waiting for Friday’s official nonfarm payrolls report, particularly the unemployment and wage-growth components. Federal Reserve officials remain divided over the appropriate policy path.
Minneapolis Fed President Neel Kashkari has argued that rates may need to rise as more data becomes available, citing strong corporate earnings, resilient consumer spending, and a labor market that has yet to deteriorate significantly.
San Francisco Fed President Mary Daly has taken a more cautious position, supporting the decision to leave rates unchanged while policymakers gather additional evidence on inflation and employment. Friday’s report could strengthen one side of that debate. Soft hiring and moderate wage growth would support Daly’s case for patience and give gold more room to advance. Strong payrolls and firm wages would reinforce Kashkari’s argument, potentially lifting the dollar and Treasury yields while testing gold’s new support levels.
Gold has also benefited from the U.S. dollar trading near a six-week low. The dollar index recently hovered around 99.78 after intervention to support the Japanese yen. Japan is believed to have sold nearly $60 billion in U.S. Treasury as part of the operation, while reported U.S. yen purchases were funded through euro sales. The intervention raised broader questions about global currency stability and helped set the stage for a softer dollar. Gold has recently traded inversely to both the dollar and oil. Wednesday’s price action demonstrated how rapidly the metal can rise when both markets move in its favor.
Treasury yields have provided a less decisive signal. The 10-year yield was near 4.6208%, while the 30-year stood at 5.1711%. The two-year yield edged up to 4.1977%, indicating that shorter-term markets still see a meaningful chance that the Fed will have to tighten policy further. The long end of the curve has stopped rising alongside oil but has not yet entered a clear decline. That leaves gold vulnerable if yields stabilize or begin moving higher again.
Gold’s technical picture improved substantially during Wednesday’s surge. The trend turned higher after prices crossed the 50-day moving average at $4,157.25 and broke through a short-term retracement area between $4,162.36 and $4,214.34. The advance also cleared previous swing highs, ending the pattern of lower tops that had defined the earlier decline. The breakout was built on an extended support base formed by lows at $3,942.10, $3,959.80, and $3,996.06. Over more than a month, that structure shifted from lower lows toward higher lows, indicating that buying pressure was gradually strengthening. Wednesday’s move also represented a change in trading behavior. Buyers were no longer simply placing bids near support; they were actively taking out offers, adding genuine demand to short covering and buy-stop activity.
The immediate challenge is the overnight high at $4,304.31. A sustained move above that level could open the way toward the next resistance cluster at $4,416.82, an intermediate 50% retracement level, and the 200-day moving average near $4,491.40. If sellers return, initial support is between $4,162.36 and $4,214.34, with the 50-day moving average at $4,157.25. A deeper pullback could target the $4,123.21-to-$4,080.46 retracement zone. Because gold covered considerable ground in only two sessions, a period of consolidation or a short-term pullback would not necessarily invalidate the new uptrend.
Michele Schneider, chief market strategist at MarketGauge, said gold’s rally above $4,200 reflects more than changing inflation or interest-rate expectations. It also signals growing investor doubts about whether governments and central banks can keep the global economy and financial markets stable.
Schneider said the force of Wednesday’s rally was surprising, but the breakout itself was not. Gold had consolidated around $4,000 for about two months while its broader fundamental support remained intact. Continued central bank purchases, including sustained demand from China and renewed accumulation by South Korea, along with rising global debt levels, continue to favor the metal. Holdings in the SPDR Gold Trust increased by 4.85 metric tons on Tuesday to 1,014.15 tons, their highest level since June 23.
Schneider argued that repeated government intervention in currencies and financial markets may gradually weaken confidence in policymakers. If that confidence deteriorates far enough, gold could continue to attract buyers regardless of its traditional relationships with rates and real yields. She also sees potential in silver if inflation pressures broaden. Silver has yet to reclaim its 50-day moving average, but a move above roughly $64 in the September futures contract could complete a bullish base and open a path toward $75 or even $80. A drop in the gold-to-silver ratio below 69 would provide additional evidence that silver is beginning to outperform.
Gold enters Friday’s employment report with stronger momentum and a more constructive technical structure. The near-term outlook is supported by the breakout above the 50-day moving average, a weaker dollar, and declining rate-hike expectations; however, parts of the rally hinge on developments that remain uncertain. A Hormuz agreement has not been finalized, oil prices could rebound, and Treasury yields have not rolled over decisively.
Friday’s payrolls report is therefore the next major test. A soft reading would validate the market’s reduced rate-hike expectations and could send gold toward resistance at $4,416.82 and $4,491.40. Strong employment and wage growth would bolster the Fed’s case for tightening and force buyers to defend the breakout zone around $4,157-$4,214. Gold remains more than 20% below its late-January record of $5,589, despite the recent rebound. The latest move has improved the outlook, but extending the rally toward $5,000 will require confirmation from labor data, bond yields, and the dollar, not simply optimism that the macroeconomic headwinds have disappeared.
