Gold (XAU/USD) is caught in a tug-of-war between strong official-sector demand and weakening technical indicators. Central banks continue to accumulate the metal, with August data showing net purchases of 39 tonnes, bringing year-to-date purchases to 170 tonnes. China led the buying, extending its 22-month streak, while Poland and Uzbekistan also added to their reserves. Analysts at ING emphasize that this demand is strategic, driven by long-term reserve diversification rather than short-term market movements.
However, the technical picture is deteriorating. Gold failed to maintain its position above the 200-day Simple Moving Average (SMA) at $4,510/$4,540, prompting a pullback. Societe Generale strategists warn that the metal is now drifting toward an interim support level near $4,095. A failure to defend this level could deepen the downtrend, targeting $4,000 and the June/July troughs at $3,960/$3,940.
Both ING and Societe Generale agree on the importance of central bank buying as a market pillar. However, they diverge on the near-term outlook. ING suggests that resilient official demand limits downside risk, while Societe Generale's technical analysis implies a potential slide toward the $3,960-$3,940 area if support fails. The consensus is that physical demand may slow the fall, but price action remains the near-term driver.
The takeaway for traders is to monitor the $4,095 support level closely. A break below this could open the door to further declines, but ING's evidence of persistent official-sector accumulation suggests that any dip into support may attract patient buyers.