Gold Price Surges to Eight-Year High on Central-Bank Buying

The gold price has seen significant gains in recent weeks, breaking out of its long consolidation range and reaching an eight-year high. As of August 12, the spot price is around $4,400 per ounce, with resistance levels at $4,490 and $4,580. The rally is supported by a weaker dollar, falling expectations of a September Fed rate hike, renewed ETF buying, and continued central-bank and Chinese demand.

Vedika Narvekar, Research Analyst - Commodities & Currencies at Anand Rathi Shares and Stock Brokers, notes that investors are now joining central banks in the gold market. Global gold ETF holdings have added 22 tonnes in the week ended August 7, while China's central bank has extended its buying streak to 21 months, adding around 640,000 ounces in July.

However, Narvekar warns of a potential risk: a hotter US inflation number or renewed rise in oil prices could push yields and the dollar higher. The key trigger this week is the US CPI release, expected at around 3.4% YoY for July. A softer number could further support gold, while a hotter print could revive Fed-hike bets.