Gold Prices Rebound on ETF Inflows and Central-Bank Buying

The gold market is showing signs of recovery as ETF investors return after two months of withdrawals. In July, European funds accounted for most of the $3 billion in inflows, which is a significant shift in positioning.

The Bank of China's 20-ton purchase is another source of support, marking its largest monthly addition since October 2023. This buying streak has been ongoing for 21 consecutive months and demonstrates a commitment to diversifying away from dollar-denominated reserve assets.

Slightly softer inflation data helped push the implied probability of another Fed rate hike down from 49% to 32%. However, gold is highly sensitive to expectations for real interest rates rather than inflation alone. If investors become less convinced that further tightening is coming, yields often stabilize or decline, reducing the opportunity cost of holding a non-yielding asset such as gold.

The technical outlook suggests that the recent rebound in gold prices may be more than just a correction within a still-corrective medium-term structure. A sustained break above 4,400 would strengthen the bullish case, while a recovery above 4,512 would be needed to suggest that a broader trend reversal is beginning to take shape.