Gold prices have climbed above the mid-year consolidation base near $4,000 as tensions in the Persian Gulf persist, with neither the United States nor Iran showing signs of de-escalation. The Strait of Hormuz, a critical chokepoint for global oil and gas shipments, remains effectively blocked, according to maritime data from Kpler, which reported no vessel crossings on Sunday—the first such occurrence since May’s peak crisis period.
The absence of a diplomatic resolution has heightened concerns over energy supply disruptions, prompting investors to seek hedges. Gold, traditionally a safe-haven asset during periods of uncertainty, has attracted flows as a result. The metal’s appeal is further reinforced by central bank demand, with China’s People’s Bank purchasing approximately 20 metric tons of gold in July, the largest monthly addition in four years. This brought the country’s total reserves to 76.0 million troy ounces, underscoring broader efforts by nations to diversify reserves amid persistent inflation risks.
Countervailing pressure stems from elevated U.S. Treasury yields, which reduce gold’s relative attractiveness given its lack of yield. The benchmark 10-year yield stood at 4.683% on Friday, near its late-July peak of 4.750%. Futures and options activity on the Chicago Mercantile Exchange (CME) reflected muted demand for downside protection, with 141,700 futures contracts and 47,200 options traded on August 17—below July’s average. Options volume, often used as insurance against reversals, declined sharply, suggesting growing confidence in the prevailing uptrend.
Technical indicators remain constructive, with short-term moving averages positioned above their longer-term counterparts, signaling a bullish bias. The Relative Strength Index (RSI) remains in positive territory, though its smaller bars indicate a consolidation phase within the broader advance. Key levels to watch include resistance at $4,420.00 and $4,660.00, and support at $4,230.00 and $3,970.00. According to the analysis, a sustained break above $4,420.00 could target $4,660.00, while a drop below $4,230.00 may expose downside toward $3,970.00.
The interplay of geopolitical risk and monetary policy will likely dictate gold’s near-term direction. Analysts caution that any resolution to the Hormuz blockade could trigger profit-taking, particularly given the reduced trading volumes. Position management remains critical, with stop-losses advised at $4,330.00 for long entries and $4,310.00 for shorts.
