Gold prices continued their upward climb on Tuesday, with spot gold breaking through multiple key resistance levels during the session and briefly reaching $4,430 per ounce. As of the time of writing, spot gold was trading at $4,413.93 per ounce, up 0.31% for the day.
On the news front, the World Gold Council released a report on Monday showing that gold prices rose 13.3% in August, ending the month at $4,563 per ounce — marking the third-largest monthly gain in the past 25 years. The rally was driven by a combination of inflows into gold-backed ETFs, an increase in net long futures positions, and active trading in call options.
Central banks continued their aggressive buying spree in August, marking the 22nd consecutive month of gold purchases. China's central bank added another 650,000 ounces (approximately 20.22 tonnes) to its reserves in August, bringing its total gold holdings to 76.73 million ounces (about 2,386.57 tonnes) by the end of the month. This represents the largest monthly increase since October 2023.
Central banks around the world have remained active buyers of gold this year. Industry insiders believe China's central bank is not purchasing gold based on short-term price gains but rather on a longer-term strategic allocation perspective. A research report from CITIC Securities suggests that gold is transitioning from a passive historical legacy on central bank balance sheets to an actively managed strategic reserve asset.
Gold prices rebounded strongly in August, breaking above $4,600 per ounce at mid-month highs before retreating sharply at month-end following hawkish comments from Federal Reserve Chair Warsh. The precious metals and commodities department of China Construction Bank noted that Fed monetary policy expectations remain the key short-term variable — if the Fed briefly raises rates, gold prices will face downward pressure, while the opposite would be supportive for gold.
The Federal Reserve is scheduled to hold its policy meeting on September 15-16. Although current market expectations lean toward a rate hike next week, the probability is only slightly above 50%, leaving significant uncertainty around the central bank's actual course of action. The US Producer Price Index (PPI) data due Thursday at 20:30 Beijing time and the Consumer Price Index (CPI) data due Friday at 20:30 will serve as the core determinants for the Fed's decision next week.
According to the CME FedWatch tool, the current probability of the Fed holding rates steady in September is 39.8%, with a 60.2% chance of a 25-basis-point hike. Looking ahead to October, the probability of rates remaining unchanged stands at 28.3%, while cumulative rate hikes of 25 and 50 basis points carry probabilities of 54.3% and 17.3%, respectively.
Looking ahead, the World Gold Council believes US fiscal and debt issues remain important support for gold. If government intervention in the bond market eases financing pressures, the gold rally could be temporarily restrained. However, if the market interprets such intervention as reflecting worsening fiscal pressures, falling real yields and a weaker dollar could further push gold prices higher. In the absence of a credible fiscal consolidation plan, gold is likely to continue benefiting from investor concerns about debt and fiscal sustainability.
Dong Ximiao, chief economist at UnionPay, said that in the short term, market sentiment and geopolitical developments remain the primary variables influencing gold prices, with price volatility potentially remaining sharp. Over the long term, structural supporting factors such as central bank purchase demand and the de-dollarization trend have not disappeared. As long as global concerns about the credibility of the US dollar system persist, gold's allocation value remains firmly intact.