Gold is having its best stretch since early summer. Spot prices pushed above $4,400 an ounce last week, with futures briefly touching $4,500, after the metal rose as much as 1.6% in a single session to $4,375.50 on Thursday — its highest level since early June, according to price tracking cited by Intellectia. The move capped a rally that has taken gold well past where it started the summer, even though it remains below the roughly $5,600 peak it touched in January.
The catalyst was Friday's one-two punch of soft economic data. A weaker-than-expected July retail sales report and a sharp drop in University of Michigan consumer sentiment led bond traders to slash the odds of a Federal Reserve rate increase at its September meeting to roughly 35%, from about 55% a week earlier, according to data reported by Bloomberg. Because gold pays no yield, it tends to benefit when rate expectations fall and the dollar weakens — and the Bloomberg Dollar Spot Index did exactly that, sliding 0.4% to its lowest level since May 29, marking a third straight losing session for the currency.
Central banks keep buying
Underneath the rate story is a steadier one: central banks have kept accumulating bullion all year. China's central bank added roughly 20 tonnes to its reserves in July alone, part of a broader push by monetary authorities to diversify away from dollar assets, a trend gold-market analysts have cited as a structural floor under prices even when Fed policy shifts. Silver has moved in gold's slipstream, with investors treating both metals as a hedge against the same mix of geopolitical risk and a softening US consumer that has also been pressuring equities and rattling retail stocks ahead of this week's earnings from Home Depot, Target and Walmart.
The rally has left forecasters debating how much further gold can run. Some strategists cited by CBS News argue that with inflation expectations still elevated — the University of Michigan survey showed year-ahead inflation expectations ticking up to 4.3% from 4.2% even as sentiment fell — gold's appeal as a hedge is unlikely to fade soon. Others caution that a resolution to the standoff over the Strait of Hormuz, which has kept oil prices and inflation fears elevated for months, could just as quickly take some shine off the trade.
For now, traders are treating gold's move as a read-through on the same forces buffeting stocks and bonds: a consumer showing new cracks, a Fed that looks less likely to tighten, and a dollar losing ground as a result. The next major test comes with the Fed's Jackson Hole symposium later this month, where any signal on the path of rates is likely to move gold as much as it moves equities.
