Gold closed higher after the dollar finally weakened
Spot gold finished Friday with a solid gain as the U.S. dollar finally gave way, allowing the rate-relief trade that had been building all week to show up in the currency market.
The metal settled at $4,376.82 an ounce, up $25.55 or 0.59%. The advance came a day after gold sold off 1.3% on profit-taking following a rally to its highest level since June 5. Friday’s recovery showed that buyers remain active underneath the market even after the sharp reversal from the highs.
The weekly gain came in around 0.9%, with the trend turning higher on the swing chart and the 200-day moving average now coming into view overhead.
The Dollar Cracks After Softer Data
The U.S. Dollar Index fell 0.3% to 99.67 on Friday — the move gold had needed all week. Bond yields had been supportive since Wednesday’s softer inflation numbers, but the currency market had remained firm until Friday’s data landed.
July retail sales dropped 0.6%, well below the 0.1% increase economists had expected. That reading followed a payrolls report that showed unexpected job losses and two inflation reports that both came in below forecasts. Consumer prices rose just 0.1% in July, bringing the annual rate down to 3.4% from 3.5%. Producer prices were flat against expectations of a 0.2% rise.
By the end of the session, traders were pricing only a 31% chance of a September rate hike, down sharply from better-than-even odds a week earlier.
Gold had spent much of the week caught between a friendly bond market and a stubbornly firm dollar. The retail sales miss broke the stalemate. The dollar dropped, gold rallied, and both sides of the rate trade finally lined up on the same day.
Yields Climbed — and Gold Still Rose
The 10-year Treasury yield rose more than 5 basis points to 4.696%. The two-year yield added 3 basis points to 4.171%, while the 30-year climbed nearly 6 basis points to 5.267%. Those are not normally supportive levels for a non-yielding asset.
Gold’s ability to advance on a day when yields moved higher is a notable signal heading into next week. The weaker dollar and falling September hike odds clearly mattered more on Friday than the rise in yields. That does not mean yields have stopped mattering. Real yields remain elevated, and as long as Treasuries continue to offer attractive returns, they will compete with gold for capital.
Oil Risk and the Strait of Hormuz
Geopolitical developments add another layer of uncertainty. Two more ships were attacked near the Strait of Hormuz this week, and the United States said it could maintain its naval blockade of Iran indefinitely. A prolonged disruption that pushes crude oil higher would feed energy costs back into the inflation data and give Fed hawks a reason to keep a September rate increase on the table.
Gold is currently benefiting from a friendlier rate backdrop created by the July data. The August numbers have not yet been collected, and the oil risk makes it harder to assume the next round of data will look equally soft.
Technical Outlook
Spot gold closed Friday in a position to test an intermediate 50% retracement level at $4,416.82 and challenge last week’s high at $4,449.83. The main trend remains up, and a break above that high would reaffirm the uptrend.
Beyond $4,449.83 lie $4,481.78 and the 200-day moving average at $4,503.24. The $4,481.78 level represents a 20% decline from the all-time high and, to some analysts, marks the start of the prior bear market. Clearing it would end that bear market phase, though it would not automatically confirm a new sustained bull market. The 200-day moving average will present its own challenge — some traders will treat it as resistance, while others may see a decisive break as a potential trigger for acceleration to the upside.
On the downside, early-session weakness on Friday confirmed the previous day’s potentially bearish closing-price reversal top. A break below Friday’s low at $4,311.04 would reaffirm that pattern. Strong downside momentum from there could open a two- to three-day move into a key 50%–61.8% Fibonacci zone between $4,195.96 and $4,136.05, an area that also contains the 50-day moving average at $4,146.45.
