Gold pulls back from $4,700 as Hormuz hopes cool haven demand

Gold price steadies near $4,700 as speculation wanes over Hormuz optimism

During the North American session, XAU/USD traded at $4,641, a 0.2% decline, as the yellow metal struggled to surpass the psychological barrier of $4,700. The Relative Strength Index (RSI) turned overbought, indicating bullish momentum stalled. Geopolitics played a significant role, with US officials confirming Trump's decision to clear the traffic separation scheme in the Strait of Hormuz, according to Axios.

Meanwhile, US housing data revealed a slight improvement, while the ADP Employment Change 4-week average rose to 11.75K, surpassing the previous 9.5K. US Building Permits in July increased by 4.3% to 1.433 million, exceeding estimates. However, the Conference Board Consumer Confidence fell short of expectations, registering 90.2, below 90.2.

Boston Fed's Susan Collins expressed a hawkish view, emphasizing that inflation remains too high and signaling concerns about price stability. She acknowledged the labor market aligns with full employment, noting the economy is expanding at near-trend rates.

Money markets remain skeptical about the Federal Reserve raising rates at the September meeting, with odds at 43% for a 25-basis-point hike and 57% for keeping rates steady, according to Prime Terminal. Analysts now focus on the release of the Fed's preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, ahead of the new Fed Chair, Kevin Warsh, speech at the Jackson Hole Symposium.

Gold has been trading sideways for two consecutive days, unable to clear the $4,700 level. This has exacerbated a retracement below $4,650, while the RSI approaches the overbought 70 level. If the RSI falls below this threshold, gold could drop further, challenging key support levels. The first support is at the $4,600 mark, followed by the 200-day Simple Moving Average (SMA) at $4,519, and the 100-day SMA at $4,379.

For a bullish resurgence, XAU/USD must reclaim $4,700. If it does, a move to the May 7 swing high of $4,764 is possible, followed by a test of $4,800. Beyond that, the next area of interest would be $5,000. Gold has long been a store of value and medium of exchange, widely seen as a safe-haven asset during turbulent times. Central banks are the largest gold holders, adding 1,136 tonnes worth around $70 billion to their reserves in 2022, the highest yearly purchase since records began.