Gold staged a powerful rally in overnight trading, becoming the most dazzling asset on the floor.
Overnight, spot gold hit a session high of $4,328.20 per ounce, settling at $4,308, marking a single-day gain of 4.20%, up $173.80, the largest one-day jump in five months. This move not only broke through the descending triangle consolidation pattern that had been capping prices for over six weeks but also concurrently closed above both the 20-day and 50-day moving averages, with technical bullish signals lighting up across the board.
This rally was driven by multiple catalysts. Goldman Sachs identified the re-entry of Chinese capital as the "most important immediate trigger" for this move; Donald Trump's latest comments regarding renewed negotiations on the Strait of Hormuz also ignited market expectations for a geopolitical risk premium.
Simultaneously, Q2 global central bank gold reserve data showed an expansion exceeding expectations, with the Bank of Korea's restart of gold purchases after a 13-year hiatus particularly drawing attention, further strengthening market confidence in sustained central bank demand providing a floor. Notably, this gold price surge was also accompanied by a significant cooling in expectations for Federal Reserve rate hikes — the CME FedWatch Tool showed the probability of the Fed holding rates steady in September rising to 45%, the highest level in over a month.
Gold bull forces are regrouping. The resonance of a technical breakout, central bank accumulation, and a shift in macroeconomic expectations brings the next key resistance level of $4,400 into view.
China's Re-entry: The Most Direct Catalyst
Goldman Sachs' Commodities Research team listed the re-entry of Chinese capital as the "most important immediate trigger" for this move. According to their monitoring, Shanghai Futures Exchange gold open interest increased by approximately 19,000 contracts on Thursday, a gain of about 6%, ranking among the top five single-day increases in nearly three years. However, the total long position size for Chinese traders remains about 50% below the peak seen in Q4 2025, indicating significant room for replenishment.
The Goldman team noted that among its institutional client base, inquiries about "when to buy" have reached a peak score of 10 out of 10, but actual participation remains at just 3 (out of a possible 10). The reason is a widespread market view that gold needs a clear signal that real interest rates have peaked to fully perform — a stance aligned with Goldman's internal position.
According to Bloomberg, Chinese institutional investors have been entering the market heavily in recent weeks, effectively providing support and keeping prices above the key $4,000 per ounce support level. Bloomberg data shows that as of Monday this week, Chinese gold ETFs have seen 14 consecutive days of net inflows, the longest streak since March of this year.
Steve Zhou, an analyst for China's largest gold ETF, managed by HuaAn Fund, stated that institutional investor interest has noticeably increased since gold prices fell near $4,000. He also pointed out that the concurrent correction in the A-share market has supported inflows into gold ETFs.
Trump's Comments Ignite Geopolitical Premium
The immediate trigger for this gold surge came from Trump's latest comments regarding the Strait of Hormuz. According to Xinhua, citing a report from the U.S. news site Axios on the 4th, regional sources and U.S. officials said the U.S., Iran, and Oman are "close to reaching" an interim agreement to reopen the Strait of Hormuz, with the U.S. hoping to announce a deal on the 5th.
The report stated that Trump said Iran is actively negotiating to reopen the Strait of Hormuz. Under the proposed arrangement, Iran would manage ships entering the strait via the northern route, while Oman would oversee vessels exiting via the southern route, with an initial 60-day free transit period that could be extended.
These remarks were not unfounded. Iran publicly stated it is not negotiating directly with the U.S. but is discussing opening the waterway through Oman, which has long served as a mediator between Washington and Tehran. The Strait of Hormuz carries about 20% of global seaborne oil flow, roughly 15% of total global oil sales, making its status critically important to global energy markets.
The heating up of the geopolitical narrative provided short-term safe-haven premium support for gold, serving as a key trigger point for this breakout.
Central Bank Purchases Hit Record; South Korea Returns After 13 Years
Beyond geopolitical factors, structural shifts in central bank demand represent a more long-term pillar in the current bull case for gold.
According to World Gold Council data, global central banks purchased 288.9 tonnes of gold in Q2, a 62% year-on-year increase, marking the strongest second-quarter performance on record. Poland led the purchases with 51 tonnes, bringing its total reserves to a record high of 632 tonnes, targeting 700 tonnes. Polish central bank governor Adam Glapiński was direct: "We have been buying gold all the time, using the opportunity of the recent price correction." China added 33 tonnes, continuing its long-term accumulation trend.
The most watched development was the Bank of Korea's restart of gold purchases after a 13-year hiatus. Seoul stopped buying gold in 2013, coinciding with a sharp price drop, which put immense pressure on the central bank's balance sheet and even led to the then-governor being summoned to parliament for questioning. However, history has provided the answer — the 90 tonnes South Korea purchased at an average price of $1,629 per ounce back then are now worth about $11.8 billion, approximately $7 billion above the original purchase cost.
The scale of South Korea's renewed purchases is limited, planning to bid for only 4 to 5 tonnes of gold annually from domestic copper and zinc smelting by-products, keeping reserves around 104.4 tonnes. But its symbolic significance far outweighs its physical volume — it signals the return of an economy that had long been absent from the gold market. Jung Hee-sub, head of the Bank of Korea's reserve management department, stated the purchase decision was not based on a specific price view but made after comprehensive consideration of domestic and international gold prices and market conditions.
Cooling Rate Hike Expectations; Technical Bullish Signals Fully Confirmed
In addition to the geopolitical and central bank narratives, marginal changes in Federal Reserve policy expectations also provided macro background support for this gold rally.
The CME FedWatch Tool shows the market's probability expectation for the Fed holding rates steady in September has risen to 45%, the lowest level of rate hike expectation in over a month. The cooling of rate expectations reduces the opportunity cost of holding gold, further opening upside space for prices.
Technically, this breakout is also significant. Gold prices not only effectively broke through the descending triangle consolidation range that had persisted since June 22 but also concurrently closed above both the 20-day and 50-day simple moving averages — with the latter being convincingly breached for the first time since March. Bloomberg strategist Cameron Crise noted that despite gold's single-day surge of over 4%, according to its traditional driver model, prices "should have" declined slightly, suggesting there is additional momentum in this rally beyond conventional explanations.
Looking ahead, the next target for bulls is around $4,400, an area that aligns closely with the historical turning point from November to December 2025 and is also near the 23% Fibonacci retracement level from the all-time high down to the recent low around $4,020. If bullish momentum weakens, initial support levels for a pullback are the 50-day moving average at $4,243, the $4,200 integer level, and the now-support-turned descending trendline around $4,070.
Deutsche Bank analysts Michael Hsueh and Bryant Xu project a year-end gold price target around $4,700, while JPMorgan's revised target still sets the Q4 average price at $4,500. The World Gold Council holds a more conservative stance in its mid-year outlook, believing that without major changes in the macro environment, gold prices will likely oscillate within a 5% range around $4,100. Analysts also caution that central bank gold buying plays more of a "floor-providing" role rather than being the main driver for substantial price appreciation — a sustained bull market still depends on the large-scale return of ordinary investors and funds.
