Gold Pulls Back from Recent Peaks; Struggles to Sustain Above $4,700 as Dollar Finds Support

Gold (XAU/USD) reached a new high since mid-May during Tuesday’s Asian session, though the precious metal encountered difficulty maintaining momentum and failed to break through the $4,700 level. The initial downward pressure on US bond yields stemming from the Treasury Department’s expanded buyback program proved short-lived as concerns mounted over the nation’s growing debt burden, which has surpassed $40 trillion. This development has reignited what traders describe as the “debasement trade,” supporting demand for gold as an alternative store of value.

Yields on long-dated US Treasuries initially declined following last Wednesday’s announcement that the Treasury Department would double its buyback operations for long-dated government debt beginning in September. However, the relief from this intervention has since completely reversed, with 10-year and 30-year Treasury yields climbing back above their pre-announcement levels. The US Dollar, meanwhile, has not followed suit amid diminishing expectations for immediate policy tightening by the Federal Reserve.

Tamer-than-expected July inflation data shifted market sentiment toward a policy hold at the upcoming September 15-16 FOMC meeting. This has kept a ceiling on the US Dollar’s attempted recovery from its three-month low and represents another factor supporting non-yielding gold. Nevertheless, traders continue to price in approximately a 75% probability that the US central bank will raise borrowing costs by year-end amid inflation risks arising from volatile crude oil prices and escalating US-Iran tensions.

In recent developments related to the Middle East crisis, Treasury Secretary Scott Bessent announced Monday that the United States is launching a campaign to isolate Iran from the global economy. Bessent also cautioned that any nation conducting business with Iran risks facing American sanctions. Iran’s Supreme National Security Council secretary, Mohsen Rezaei, had stated that the Islamic Republic would halt all oil exports through the Strait of Hormuz and elsewhere in the Persian Gulf if economic warfare continues.

This maintains geopolitical risk premium in the market, providing some support for crude oil prices and the safe-haven dollar. Consequently, this caps gold’s upside potential as traders now await Wednesday’s release of the US Personal Consumption Expenditures (PCE) Price Index. Additionally, Federal Reserve Chair Kevin Warsh’s keynote address at the annual Jackson Hole Symposium on Friday will be closely examined for further interest rate guidance, which will impact the dollar and provide meaningful direction for gold prices.

XAU/USD daily chart

Technical Analysis

The recent breakout through a confluence resistance near the psychologically significant $4,500 level – comprising the technically important 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement of the March-June decline – favors XAU/USD buyers. Furthermore, the Moving Average Convergence Divergence (MACD) remains positive above the zero line, suggesting that buying pressure continues to dominate even as conditions appear extended.

Meanwhile, the Relative Strength Index (RSI) hovers in overbought territory near 71 and fails to help gold build on intraday gains beyond the 50% retracement level. Nevertheless, momentum indicators remain constructive, indicating that any corrective pullback is more likely to attract buying interest and remain limited. Initial support sits at the 200-day SMA and the 38.2% retracement confluence, ahead of $4,500, while a deeper decline would target the 23.6% Fibonacci level around $4,294 as a more distant floor.

On the upside, immediate resistance emerges at the 50.0% retracement around $4,680.86, with additional barriers at the 61.8% retracement near $4,853.70 and then the 78.6% level at approximately $5,099.77 ahead of the previous swing high around $5,413.22.

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