Spot gold surged in Asian trading on Friday, August 7, breaking through the $4,400 per ounce mark to hit a fresh high since June 5. The precious metal posted a weekly gain of over 7%, its largest since January, and a single-day jump of 4.16% on August 5 marked the biggest daily advance since February. The catalyst for this gold rally was the dire US July nonfarm payrolls report released on August 7, which showed a decline of 23,000 jobs, far below the expected gain of 85,000, with downward revisions totaling 103,000 for May and June combined.

Markets immediately reassessed the Federal Reserve's policy path. The CME FedWatch tool showed the probability of a September rate hike plummeting to 44% from 67% a week earlier, with some investors even betting on a return to rate cuts. The knock-on effects were widespread: the US dollar index weakened to around 99.70, an eight-month high, while the 10-year Treasury yield fell to about 4.67%, down from a recent peak of 4.74% since January 2025. The dual pressures of real interest rates and the dollar eased simultaneously, unlocking significant valuation room for the non-yielding asset.

A second factor driving gold higher was the expectation of geopolitical easing. Reports that Iran and Oman were on the verge of finalizing a transit agreement for the Strait of Hormuz triggered a sharp drop in international oil prices, cooling energy inflation concerns and further reducing rate-hike bets. However, the narrative reversed over the weekend. Iranian Foreign Minister Araghchi explicitly stated that adjusting maritime channels does not mean reopening the Strait of Hormuz. National Security Council Secretary Zolgadr set five conditions for reopening the strait: a permanent ceasefire, lifting of the naval blockade and all sanctions, return of frozen assets, and compensation for war damages. A Revolutionary Guard spokesperson took a tougher stance, declaring that the strait would remain under control until all conditions are met.

Due to the deadlock in negotiations, WTI crude jumped 2.16% on Monday to settle above $78 per barrel, while Brent crude surged 2.4% to $83.5 per barrel. Oil prices remain significantly above pre-conflict levels, meaning the risk of energy inflation has not been fully eliminated. This limits the downside for the US dollar and Treasury yields, creating an invisible ceiling for gold prices.

Market attention has now shifted to Wednesday's US July CPI and Thursday's PPI data. Analysts suggest that the risk of a weaker dollar is greater if the upcoming inflation data is soft. A weak CPI reading would reinforce market expectations of a dovish Fed policy, weighing on the dollar. Conversely, if CPI comes in higher than expected, a rise in short-term Treasury yields could trigger a brief dollar rebound. However, analysts emphasize that with the Fed's policy already at restrictive levels, the scope for further aggressive rate-hike expectations is limited, so the dollar faces medium-term headwinds. This suggests that even if CPI prints hot, the downward pressure on gold will be contained.

Gold is currently consolidating near the $4,400 level, with $4,300 serving as a key support line for bulls. Deutsche Bank recently released a report stating that the bottom for gold prices has likely been formed by the end of 2026, setting a year-end target of $4,600 per ounce. UBS has issued a more aggressive forecast of $5,000 per ounce by the first half of 2027. After a sustained rally, technical indicators show overbought conditions, and with CPI and PPI data on the horizon, the market is hesitant to take large positions. This suggests gold is more likely to trade in a high-range consolidation rather than staging a violent breakout. The true smart money is waiting for Wednesday's 20:30 economic data release. If inflation data is supportive, gold could test $4,500 or higher. If higher energy prices fuel an inflation rebound, rising Treasury yields could push gold back to $4,250.

From a technical perspective, gold maintains a constructive bullish structure. Spot gold is trading well above the 50-day simple moving average (SMA) at $4,150 per ounce but remains below the 100-day SMA at around $4,389, indicating the metal is in a recovery and rally phase. The daily relative strength index (RSI) is in the mid-60s, suggesting bullish momentum is solid but not yet overbought. The average directional index (ADX) is near the 20 level, indicating a gradually strengthening trend. On the upside, gold first needs to break through the 100-day SMA near $4,389. A decisive move above that level would open the door to the next major resistance at $4,500. On the downside, initial support lies near the 50-day SMA at $4,150, with a more critical support level at $4,000. A break below $4,000 would significantly damage the current bullish technical structure and could trigger a deeper correction. Overall, gold is likely to consolidate at elevated levels in the short term ahead of the US CPI release. As long as prices hold above $4,150, the medium-term bullish outlook remains intact, with the $4,389 to $4,500 zone being the key area for the next breakout.