Gold's Technical Test: Can Bulls Clear $4,535 Threshold?

Gold's recent correction has been significant, falling over 16% from its January record peak to around $4,180. However, following a strong three-day run, the metal is now within striking distance of a crucial technical threshold that could determine whether this is a genuine trend reversal or just a bear-market bounce.

The catalyst for gold's surge was Friday's US jobs report, which showed a loss of 23,000 nonfarm payrolls in July against forecasts of 80,000 additions. Hourly earnings rose only 0.1% month-on-month and 3.2% year-on-year, while the unemployment rate ticked lower to 4.1%. The data was described as a 'cold shower' for growth expectations.

The jobs report scrambled interest-rate outlooks, with Treasury yields falling sharply in response to the payrolls miss. This reduced the opportunity cost of gold relative to fixed-income assets, making it more appealing. The Federal Reserve's decision to leave its benchmark rate unchanged has also led some economists to pencil in an extended pause.

The central banks' structural bid for gold is another key factor in its recent price action. They added a net 289 tonnes of gold in the second quarter, up 62% from the same period last year and the strongest Q2 on record. This buying stands in contrast to Western investor behavior, with gold ETFs shedding approximately 45 tonnes over the same stretch.