Don't count your chickens before they hatch. Gold rose to $4,400 an ounce, but traders are in no hurry to celebrate — they prefer to wait for the key US inflation report before drawing conclusions.

Weekly dynamics of gold

Ahead of the important release, the XAU/USD rally stalled a bit: Donald Trump indicated he is ready to pressure Iran economically, not with bombings, to reopen the Strait of Hormuz. Tehran has not yet confirmed free passage through the oil artery. The lack of a deal pushed Brent higher, and with it came renewed fears that the Federal Reserve will have to keep rates high. For gold, which pays no interest, this is a classic headwind.

TD Securities warns: for XAU/USD to move higher, the market needs clearer signs not just of inflation but of stagflation — a combination of rising prices and a slowing economy. However, Asian demand and inflows into exchange-traded funds continue to support the precious metal, and some trend followers are already covering shorts.

Gold remains roughly 17% below the levels seen before the war in Iran began in late February. The dollar index is weakening meanwhile, and oil is rising — a classic duo that increases pressure on the precious metal in the near term but plays to its advantage over the medium term.

Dynamics of the People's Bank of China reserves and gold

At the same time, the People's Bank of China increased gold reserves by 20 tonnes in July — the 21st consecutive month of purchases and the best result since October 2023. The regulator clearly has no doubts about gold, even if traders remain cautious for now.

According to Citadel Securities, five catalysts for asymmetric upside are converging for gold and silver: a reassessment of the Fed's rate trajectory, an acceleration of central bank purchases, net short CTA positions, bullish dynamics in derivatives within the largest ETFs, and the potential return of retail investors. As of August 6, both gold and silver were net short — which, according to Citadel, is not a headwind but fuel for a future surge.

Moreover, the weakness of the US dollar and the market's reassessment of the Fed rate trajectory are already working in favor of non?yielding assets like gold. Add concerns about possible currency and Treasury interventions — and gold's status as a reserve asset in investors' eyes only strengthens amid accelerating central bank demand.

Still, the fate of the coming weeks depends not on China or Citadel but on one number — US inflation. Will gold be able to hold $4,400, or will the report remind the market that Fed rates could stay high for a long time? In my view, the bulls have more arguments now than it may appear at first glance.

Technically, on the daily chart, the Wolfe Wave pattern for gold continues to play out. Its target is at $5,230 per ounce. The rally potential for XAU/USD is far from exhausted. It makes sense to buy the precious metal on pullbacks.