Key Takeaways
- Spot gold rose to approximately $4,403 per ounce, supported by aggressive central-bank accumulation and rising expectations for a pause in the Federal Reserve's rate-hike cycle.
- UK housing market sentiment improved as the RICS House Price Balance rose to -30% in July, up from -33% in June, signaling a potential floor in the sector's long-standing weakness.
- Oil-driven inflation remains a critical risk as ongoing tensions in the Strait of Hormuz keep Brent crude prices elevated near $85 per barrel, complicating the global disinflation narrative.
- Central bank demand remains robust, with the People's Bank of China increasing its gold reserves for a 21st consecutive month, providing a structural floor for bullion prices.
Gold Rallies on Fed Policy Shift and Geopolitical Tensions
Spot gold traded near $4,403 per ounce on Wednesday, buoyed by a "perfect storm" of supportive macro factors. Investors have significantly lowered their bets on further interest rate hikes following a string of cooling labor data, which has increased the appeal of non-yielding bullion. Market participants are now closely watching the upcoming U.S. Consumer Price Index (CPI) report to confirm whether the Federal Reserve will maintain its current pause through the September meeting.
The rally is further underpinned by relentless buying from global central banks, particularly in emerging markets. The People's Bank of China added roughly 20 tonnes of gold to its reserves in July, marking nearly two years of continuous monthly purchases. This institutional demand has helped gold recover from its earlier quarterly slump, even as real yields remain volatile.
Hormuz Risks Keep Energy-Driven Inflation Alive
Despite the bullish sentiment in precious metals, the broader market remains wary of "sticky" inflation driven by energy supply disruptions. Tensions in the Strait of Hormuz have reached a critical impasse, with the International Energy Agency (IEA) warning that global oil stockpiles are "rapidly depleting." This supply-side pressure has kept Brent crude and West Texas Intermediate (WTI) trading in an elevated range, threatening to spill over into broader consumer prices.
The standoff between the U.S. and Iran over the waterway—a transit point for roughly one-fifth of global oil supply—has introduced a significant geopolitical risk premium. Analysts at J.P. Morgan (JPM) noted that while the macro backdrop for gold is supportive, the risk of a "hawkish surprise" remains if the Fed is forced to respond to persistent energy-driven price pressures.
UK Housing Market Shows Signs of Stabilization
In the United Kingdom, the latest RICS Residential Market Survey offered a glimmer of hope for the property sector. The headline house price balance improved to -30% in July, moving in a "less negative" direction for the second consecutive month. While the figure remains in contractionary territory, the improvement from June's -33% suggests that the worst of the housing market slowdown may be passing.
New buyer enquiries also showed signs of life, reaching their highest level since February. This stabilization is largely attributed to a slight easing in mortgage rates as expectations for Bank of England policy begin to pivot. However, surveyors remain cautious, noting that high borrowing costs and economic uncertainty continue to weigh on overall transaction volumes across the UK.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.