Gold Poised for Continued Rally Amidst Geopolitical Tensions and Softening US Data
New Delhi, India – August 17, 2026 – Gold prices are expected to maintain a positive trajectory in the near term, with experts recommending a "buy on dips" strategy. This optimistic outlook is fueled by a confluence of factors, including reduced expectations for interest rate hikes by the Federal Reserve, softening US economic data, and escalating geopolitical tensions.
Praveen Singh, Head of Currencies and Commodities at Mirae Asset ShareKhan, projects a positive bias for the precious metal, suggesting that investors should capitalize on any price pullbacks.
Gold’s Recent Performance and Momentum
Spot gold has demonstrated robust performance, extending its weekly winning streak for a second consecutive week, closing 0.70% higher at $4376 in the week ending August 14. The momentum has carried into the current week, with gold trading at $4421, up nearly 1% for the day as of August 17.
Geopolitical Landscape: A Major Catalyst
The geopolitical sphere is providing significant upward pressure on gold, a traditional safe-haven asset. The expiration of the US-Iran 60-day ceasefire MoU on August 17, coupled with Iran’s declaration of a shift to an "offensive" and "maximum deterrence" policy, has heightened regional instability. Brigadier General Yadollah Javani, a senior Islamic Revolutionary Guard Corps (IRGC) commander, indicated Iran’s disinterest in extending the agreement, further exacerbating tensions.
Meanwhile, critical talks between Iran and Oman regarding the Strait of Hormuz are ongoing, even as traffic through the vital oil shipping lane has reportedly come to a standstill. Adding to the complex picture, US President Trump has ordered the Pentagon to scale back joint military exercises with South Korea, citing dissatisfaction with support on Iran and his relationship with North Korea. The annual Ulchi Freedom Shield drills, scheduled from August 17-27, are now impacted.
In a dramatic development, President Trump reportedly threatened to bomb Oman if it obstructs US-Iran negotiations. Concurrently, the US is preparing to impose additional economic sanctions on Iran, aiming to compel a return to the negotiating table. These new sanctions would build upon the 2,200 already in place since 2018 and include a continued blockade of Iran’s ports.
Amidst these tensions, Brent crude oil closed with a 6% weekly gain at $88.60, with futures marginally higher at $88.21 at the time of reporting.
Economic Data Roundup: A Mixed Bag
Recent economic data presents a mixed global picture, with some indicators pointing towards a potential slowdown, which could further support gold.
While US Empire manufacturing and NAHB housing data released on Monday exceeded expectations, other key economic indicators were softer. Japan’s Q2 economic growth decelerated to 0.3% (forecast 0.5%) from 0.5%, with year-on-year growth cooling to 1.1% from 1.8%.
China’s economic performance in July was particularly disappointing. Retail sales rose a meager 0.6% year-on-year, significantly below the 1.5% forecast. Industrial production also cooled to 4.5% from 5.3% in June, missing the 5% estimate. Fixed asset investments year-to-date declined by 6.7%, worse than the forecasted -6.2%. New home prices marked their 37th consecutive monthly decline at 0.18%. These figures suggest that China may struggle to achieve its H2 GDP growth target of 4.3%, essential for reaching the government’s overall 4.5% growth goal.
In the US, last week’s data largely came in on the soft side. Advance retail sales for July declined by 0.6%, contrary to expectations for a 0.1% increase. Excluding auto and gas sales, the decline was 0.3%. The University of Michigan consumer sentiment index slumped to 51 in August (preliminary reading) from 55.20 in July, missing the forecast of 55. While one-year inflation expectations were slightly hotter than expected at 4.3%, ten-year expectations remained anchored at 3.3%. Encouragingly for the Fed, July US CPI data continued its disinflationary trend, with headline CPI easing to 3.4% from 3.5% in June, matching estimates, and July PPI also cooled.
US Dollar Index and Yields Respond to Softening Data
The US Dollar Index has been on the defensive following the softer US economic data, as traders pare back their rate hike expectations. The index was hovering around 99.50, down approximately 0.20% for the day. This depreciation of the dollar makes gold more attractive to international buyers.
Two-year Treasury yields remained steady at 4.17%, while ten-year yields saw a slight increase of 2 basis points to 4.71%. The US Dollar Index was up 0.15% for the week ending August 14 but is nearly 2.3% down from its cycle high of 101.80. Two-year yields have sharply retreated from their 19-month high of 4.37% reached on July 23, while ten-year yields have slightly pulled back from their eighteen-month high of 4.75% on July 31.
Investor Positioning and Inventory Trends
Money managers have significantly increased their bullish gold bets, adding 9,470 net-long positions in the week ending August 11, bringing the total to 141,868 – the most bullish stance in over 10 months. Long-only positions surged by 9,671 lots to 151,491, marking a seven-month high. Short-only positions also saw a slight increase of 201 lots to 9,623.
Total known global gold ETF holdings, after rising for seven consecutive days, experienced a slight decline. Holdings currently stand at 97.34 Moz, up 1.18 Moz from the July cycle low, but still down 1.61 Moz year-to-date, as investors had previously liquidated holdings due to Fed rate hike concerns. Registered COMEX gold inventory is at 14.47 Moz, a nearly 2% increase from the cycle low of 14.19 Moz seen on August 7.
Dwindling Fed Rate Hike Expectations
A recent Reuters survey of 104 economists indicates overwhelming sentiment that the Federal Reserve will maintain benchmark interest rates at 3.5%-3.75% through September and for the remainder of 2026. Nearly 80% of those polled foresee no change in interest rates through the end of next year.
This sentiment is reflected in the dwindling probability of a Fed rate hike by year-end, which has fallen from 80% a month ago to 68%. This reduced likelihood of aggressive monetary tightening is a key bullish factor for gold.
Upcoming Data to Watch
Traders will be closely monitoring a series of upcoming economic data releases this week. Major US data includes June TIC flows, weekly ADP employment change, July import price index, July housing starts, July industrial production, August Philadelphia Business Outlook index (all on August 18), July Leading Index (August 20), and S&P PMIs (August 21).
Internationally, the Eurozone’s July CPI (August 19) and PMIs (August 21), along with the UK’s July monthly labour report (August 18), July CPI (August 19), and PMIs (August 21), will also be under scrutiny.
Gold Price Outlook: Positive Bias with Resistance at $4500
Given the reduced possibility of aggressive rate hikes, softening US data, and rangebound crude oil prices, spot gold is expected to trade with a positive bias in the short run. While some consolidation is possible, which would be healthy for the metal, the shiny metal may test resistance at $4500 in the near term.
Investors are advised to "buy into the dips rather than chasing the rally." Key support levels are identified at 4385/4290-4300/4200-$4220.
(Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)
