Gold prices have surged 9% in August 2026, marking the strongest monthly performance since January's 13% jump, with spot gold reaching $4,397 per ounce on Friday, up 1% for the day and positioning for a second straight weekly gain. The metal touched $4,450 on Thursday, its highest level in 10 weeks, following softer-than-expected US inflation data that eased pressure on the Federal Reserve to tighten monetary policy. After a brief consolidation, gold is expected to test resistance at $4,500, with support levels at $4,300/$4,200-$4,220. The recovery has brought gold closer to the $4,500 level after prices traded below $4,000 in mid-July, with spot gold having closed at $3,972.94 on July 16 before beginning its latest recovery. Despite the recent rally, gold remains 21.5% below its record high of $5,602 reached at the start of the year, as per LiveMint.
The much-awaited July US CPI report showed a disinflationary trend holding as headline CPI edged lower from 3.5% in June to 3.4% in July, trailing the estimate of 3.5%, according to Mirae Asset ShareKhan. Core CPI cooled from 2.6% in June to 2.5% (forecast 2.5%), with both core and headline CPI inflation showing subdued month-on-month readings that matched their respective estimates. US PPI cooled from 5.5% year-on-year in June to 4.7% in July, trailing the estimate of 4.9%, while core PPI rose 4.2% in July versus the forecast of 4.1% and June data of 4.7%. Back-to-back benign inflation readings, coupled with last week's softer-than-expected jobs report, have eased pressure on policymakers to tighten monetary policy at their meeting next month, reviving demand for the safe-haven metal. Money markets are now pricing in around a 35% chance of a Fed rate hike in September, down from 55% a week earlier, as per LiveMint.
The US dollar index slipped below 99.6 on Friday, moving closer to its two-month low of 95.53 recorded on August 7, as softer inflation data pointed to easing price pressures. A weaker dollar typically supports gold prices by making the dollar-denominated commodity cheaper for overseas buyers. Jateen Trivedi, VP Research Analyst at LKP Securities, noted that "Gold traded higher this week, gaining around 1%, with the rally extending to nearly 2.5% at its peak, supported by softer-than-expected US inflation." The softer inflation data has improved sentiment towards bullion and supported expectations of a more accommodative Fed stance, according to LiveMint. The US Dollar Index was flat at 99.98, down 1.8% from its cycle and 15-month high of 101.80 hit on June 24, providing additional support for precious metals.
Geopolitical uncertainty around the Strait of Hormuz continues to support precious metals demand, with conflicting reports creating market uncertainty. Although Pakistan said that the US and Iran were close to a deal on Hormuz that will lead to a partial reopening of the Strait, the situation remains unclear as Iran seeks concessions from the US in exchange for opening the Strait of Hormuz. The conditions stated by Iran include reparations for war damages and unfreezing of Iranian assets, while the US President Trump has called for compensation for war damages, the killing of US soldiers, and protests earlier this year. US Treasury Secretary Scott Bessent has promised unprecedented "economic isolation" for Iran and a "one-two punch" that includes the continued blockade of the country's ports. The consideration of economic sanctions came after US President Donald Trump earlier this week said the US Navy's blockade of the strait is preventing Iran from selling its oil on international markets, effectively putting further pressure on the Iranian economy, as per LiveMint.
China's total gold consumption rose 1.23% to 511.41 tons in the first half of 2026, according to the latest data from the China Gold Association (CGA), as reported by Mirae Asset ShareKhan. Demand for gold jewellery plummeted 33.88% year-on-year to 132.13 tonnes, while investment demand recorded an increase of 28.42% to 339.34 tonnes. This strong investment demand offset the weak jewellery sector, demonstrating China's continued strategic interest in gold accumulation. The People's Bank of China added gold to its gold reserves for the twenty-first straight month last month as its holdings rose by 640,000 ounces, or about 20 tons, in July -- the biggest increase in holdings since October 2023. The PBoC has been moving some of its gold reserves from London to Hong Kong over the past few months as it intends to make Hong Kong a major bullion-trading hub and establish a gold clearing system that was launched on a trial basis in July.
