Gold Approaches $4,700 as China Demand Firms Ahead of Jackson Hole

Gold's rally continued as the U.S. Treasury's expanded bond buyback program contributed to lower Treasury yields and a softer U.S. dollar. A weaker dollar makes gold less expensive for international buyers, while lower yields reduce the opportunity cost of holding the non-yielding metal.

Investor demand has also strengthened. China's net gold imports through Hong Kong increased by about 11% in July, providing evidence of firmer investment demand from one of the world's largest gold markets. This adds another layer of support to the rally alongside the recent improvement in financial-market demand.

Markets are now increasingly focused on U.S. monetary policy. The Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation measure, is due Wednesday, while Federal Reserve Chair Kevin Warsh is scheduled to speak at the Jackson Hole Symposium on Friday. Recent softer inflation and employment data have reduced expectations of a September rate hike, supporting gold by lowering the expected cost of holding a non-yielding asset.

Geopolitical uncertainty remains relevant as well. Iran has vowed to resist new U.S. sanctions, maintaining an additional source of uncertainty for global markets. However, the immediate focus for gold has shifted toward the U.S. inflation data and Federal Reserve policy outlook.

Gold's move toward $4,700 extended the recent breakout above the 200-day moving average and brought the metal to its highest level in more than three months. However, the failure to immediately break through $4,700 indicates that the level could act as an important near-term resistance point.