Gold hits 3-month high as weak dollar and Fed bets put $4,700 in play

Gold climbed to its highest level in more than three months on Monday as a softer US dollar extended bullion’s powerful August rebound, while investors turned towards this week’s inflation data and Federal Reserve Chair Kevin Warsh’s Jackson Hole speech for the next policy signal.

Spot gold rose about 0.8% to $4,641.27 an ounce in Asian trading after touching its strongest level since May 15. US futures advanced to about $4,697.70.

Bullion gained more than 5% last week as the dollar weakened and concerns around Treasury intervention and US fiscal policy fuelled demand for hard assets.

Dollar weakness keeps the rally alive

The dollar remained near multi-month lows on Monday after falling sharply last week.

Its latest weakness followed the Treasury’s decision to expand buybacks of longer-dated securities, initially intended to improve market liquidity after a surge in long-term borrowing costs.

For gold, the signal has extended beyond the immediate effect on yields.

The Treasury move has revived concerns about debt sustainability and the purchasing power of the dollar, encouraging investors to favour scarce assets such as bullion and Bitcoin.

Bannockburn Global Forex managing director Marc Chandler told Kitco News that gold’s move above $4,600 had strengthened its technical position.

He sees a convincing extension above that level potentially opening the way towards roughly $4,680, while cautioning that momentum has become stretched after the rapid advance.

PCE and Warsh become the next test

The rally now faces a more conventional macro test.

The Bureau of Economic Analysis will release July personal income and spending figures, including the PCE price index, on Wednesday, August 26. The latest reading showed headline PCE inflation at 3.7% in June, still well above the Fed’s 2% goal.

Warsh is scheduled to deliver keynote remarks at the Jackson Hole Economic Policy Symposium on Friday, August 28.

His comments will be scrutinised after July’s Fed meeting showed greater concern about inflation and growing support for tighter policy.

Markets still favour the Fed leaving rates unchanged in September, although futures continue to assign a meaningful probability to a quarter-point increase.

Higher rates would normally weigh on non-yielding gold.

FXTM’s Lukman Otunuga told Kitco News that the PCE report and Warsh’s address could set the tone for gold into September, with the dollar remaining one of bullion’s most important near-term drivers.

Iran sanctions add another haven bid

Geopolitics is providing a second layer of support. Washington is preparing tougher sanctions against Iran and its trading partners as the two sides remain locked in a dispute over the Strait of Hormuz.

US officials have presented the coming measures as an unusually aggressive financial campaign aimed at cutting Tehran’s access to trade and funding.

Oil slipped on Monday as investors took profits ahead of the announcement, but the confrontation remains a source of inflation and market risk.

Silver held near $69 an ounce, while platinum traded around $1,879 and palladium around $1,350.

Gold’s next challenge is whether it can hold above $4,600 once attention shifts from dollar weakness to inflation and Fed policy.

Softer price data or a flexible message from Warsh could reinforce the rally, while a renewed rise in real yields would test the strength of the breakout.