Central Bank Conviction Drives XAU/USD Momentum

Gold (XAU/USD) has decoupled from traditional supply-demand commodity dynamics, with pricing power increasingly concentrated in the hands of conviction buyers. Goldman Sachs research shows that roughly 70 percent of monthly price swings in gold are explained not by mine output but by central bank accumulation, ETF flows, and speculative positioning. A single block of 100 tonnes of net purchases by these conviction players can directly add upward pressure to gold’s price. This marks a sharp departure from oil or natural gas where higher prices typically spur new supply. In gold, higher prices rarely trigger liquidation because emerging-market households seldom sell, and mine production remains broadly inelastic regardless of price.

Geopolitical Shifts Reinforce Official Demand for Gold

Central banks have transitioned from net sellers into structural buyers of gold, a reversal that accelerated after the global financial crisis and intensified following the freezing of Russia’s reserves in 2022. The reasoning is simple: gold held domestically cannot be seized, unlike foreign-held reserves. Emerging-market monetary authorities from Asia to Latin America have multiplied their gold holdings fivefold since then, altering the historical correlation between interest rates and bullion. This shift explains why gold prices have continued to rise despite intermittent ETF outflows, with sovereign demand overwhelming private selling.

Powell’s Jackson Hole Tilt Ignites Rally Above $3,370

The latest catalyst came from Federal Reserve Chair Jerome Powell’s speech at Jackson Hole. By explicitly recognizing labor-market weakness and stating that the balance of risks had shifted, Powell sent markets scrambling to reprice policy expectations. September rate cut odds surged from 72 percent to 91 percent within hours. Gold reacted instantly, rallying 1.07 percent to close the week at $3,371.23, marking a $35.53 daily gain and reclaiming bullish momentum after bouncing from the key pivot at $3,310.48. The U.S. Dollar Index closed at 97.732, down 0.11 percent, while the 10-year Treasury yield fell to 4.256 percent, removing critical headwinds and reinforcing gold’s breakout attempt.

Technical Picture: Support at $3,310, Resistance Near $3,400

The confirmation of $3,310 as weekly support has shifted traders’ attention to the resistance cluster at $3,409.43. A weekly close above that opens the path toward $3,439, $3,451, and the record peak at $3,500.20. Momentum indicators confirm the bullish undertone, yet sellers remain active around $3,400 where psychological resistance is strongest. If profit-taking triggers a pullback, dip buyers are expected to defend the 50-day moving average near $3,350, followed by the 20-day at $3,345 and the 100-day at $3,309. Downside risks expand if those levels break, exposing $3,268 and potentially $3,120, but so far the price action shows buyers willing to step in above $3,310.

Fed Policy, Labor Data, and Inflation Set the Next Test

The coming week is critical, with jobless claims and Core PCE inflation scheduled. Traders will watch Thursday’s claims print at 12:30 GMT closely, as Powell has tied future policy to labor stability. A weak claims number could cool easing bets, but a soft PCE on Friday would reignite the rally. Expectations center on a 0.3 percent monthly PCE increase. If inflation cools and claims remain elevated, gold could pierce $3,409 and extend into the mid-$3,400s. Any upside surprise in inflation, however, may stall the breakout.

Speculative Pressure at $3,400 as Bulls and Bears Clash

The $3,400 level has emerged as a battleground. Bears are layering shorts near this threshold, betting on a dollar rebound, while bulls remain emboldened by Powell’s shift. Despite short-term turbulence, gold has gained 3.8 percent in the past month and a stunning 43 percent year-on-year. This performance underscores its safe-haven appeal amid tariff conflicts and global trade friction. Recent commentary from Fed officials including Michelle Bowman, who hinted at three cuts in 2025, further fuels bullish conviction. Futures markets currently price an 89 percent chance of a September cut, reinforcing expectations that dips will be bought aggressively.

Market Structure and Long-Term View on XAU/USD

Gold’s year-long resilience rests not only on central banks and ETFs but also on opportunistic household demand in emerging markets, which consistently absorbs supply without selling into rallies. That storage behavior creates a sticky demand base that keeps supply off the market. At the same time, ETF flows, though slower to react, magnify Fed policy shifts. With inflation pressures easing and employment data softening, the macro landscape continues to favor bullion over yield-bearing assets. Structurally, the 3,310 support zone remains the key defense line for bulls, while a decisive break of 3,409 would reset targets toward 3,452 and 3,500.

Verdict on Gold (XAU/USD): Buy the Dips, Bullish Bias Intact

All current data points to a constructive view. Central banks remain net buyers, ETFs are positioned to respond positively to any further dovish tilt, and speculative profit-taking has been absorbed at higher lows. Gold at 3,371 sits comfortably above major support, with upside potential unlocked if $3,409 is cleared. Near term volatility will hinge on PCE and jobless claims, but the structural bull cycle driven by central bank conviction and weakening yields remains intact. The rating is Buy, with targets stretching toward 3,452 and 3,500 provided that the $3,310 floor continues to hold.

That’s TradingNEWS