Gold hits three-month peak above $4,600 as Middle East risks fuel rally
Gold price hits a three-month high and is poised to end the week with gains of over 5.6%, even though business activity in the services sector in the US was solid. Recent developments in the Middle East and a softer US Dollar underpin the yellow metal, which has surpassed the $4,600 threshold.
Gold prices surged to a three-month high above $4,600 due to concerns in the Middle East and a weaker US Dollar. The XAU/USD pair traded at $4,622, up over 2.3%. The US S&P Global Services PMI for August came in stronger than expected at 56.8, surpassing estimates of 54. The Manufacturing PMI slowed slightly to 53.2, its lowest in five months.
Despite solid US business activity, investors focused on the US Treasury's plan to buy back bonds. The US Dollar Index hovered around 98.82, while US Treasury yields rose to 4.75%. Poland's central bank decreased its gold purchases to 7.8 metric tons in July. Gold's trend moved up as buyers reclaimed the 200-day SMA at $4,514, bolstering the rally above $4,600.
The next resistance is at $4,650, followed by $4,700 and the May 8 high of $4,749. If prices fall below $4,600, support will be found at the 200-day SMA at $4,514, then $4,500, and the 100-day SMA at $4,379. Central banks, particularly those in emerging economies like China, India, and Turkey, have been increasing their gold reserves as a hedge against currency depreciation and inflation.
Gold's inverse correlation with the US Dollar and US Treasuries means it often rises when the dollar weakens or interest rates are low.
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