Gold appears set for a rebound as it regains safe-haven appeal after US-Iran war selloff

Gold prices have surged 9% in August, reaching approximately $4,400 per ounce. This indicates a resurgence in the precious metal's appeal among institutional investors and central banks, with potential for further increases as the market moves past the initial shock of the US-Israeli war with Iran, according to Reuters. The conflict, which began in late February, caused gold to plummet from a record $5,595 per ounce in January to under $4,000 in June, as investors sought liquidity and some central banks tapped their reserves to bolster domestic economies amid rising oil prices.

Analysts note that gold has broken through two significant resistance levels this month, aided by lower oil prices and weaker U.S. inflation data, which dampened expectations for additional interest-rate hikes. James Steel, HSBC's chief precious metals analyst, suggests that central banks or sovereign wealth funds may have been increasing their gold holdings, though this remains speculative.

Strong institutional demand for large gold bars, particularly in Asian markets like China, where the commodity's premium stood at $1.50 an ounce, may also be contributing to the upward trend. However, factors such as stalled efforts to resolve the Iran war, low demand for jewelry and coins, and reduced inflows into interest-rate-sensitive gold-backed ETFs could curb further gains.

The World Gold Council reports that these funds only added $7 billion in assets under management during the first half of August, bringing the total to $582 billion. Technical indicators also raise concerns, as the relative strength index suggests gold is nearing short-term "overbought" levels, and the 200-day moving average, at $4,504, remains a significant resistance level.