Gold consolidates as China central bank makes largest purchase since 2023

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Gold gains 0.66% today to $4,405

Highlights

China's central bank acquired 650,000 ounces of gold in August, its largest monthly purchase since 2023.
Renewed attacks on ships in the Middle East have increased inflation concerns, raising speculation about potential US rate hikes and their impact on gold's safe-haven demand.
Gold trades below key moving averages with bearish momentum signals; price is expected to range from $4,330 to $4,481 over the next 2 to 3 days.

Central bank accumulation and Middle East tensions boost market demand

China's central bank made its largest monthly gold purchase since 2023 during August, acquiring 650,000 ounces, as reported by Oilprice. This sizable addition to official gold reserves directly strengthens physical demand, reinforcing central banks' role in shaping bullion market trends. Separately, Bloomberg notes that renewed attacks on ships in the Middle East have heightened inflationary concerns, fueling speculation around prospective US rate hikes and their indirect effect on gold’s safe-haven appeal.

Bearish momentum prevails as resistance levels constrain attempts at reversal

On the H4 timeframe, XAU is positioned below the MA-20 at $4,411 and MA-50 at $4,422, with the MA-200 higher at $4,564. The Ichimoku Kijun sits just overhead at $4,428, acting as immediate resistance. Momentum indicators are negative: both MACD and ADX point to bearish momentum, while RSI signals a Sell and the Awesome Oscillator aligns with the ongoing downtrend. Bull/Bear Power shows overbought conditions, contrasting with neutral CCI and Stoch RSI, indicating a divergence between short-term buyer activity and underlying weakness.

Consolidation likely as breakout risk hovers around resistance boundaries

Over the next two to three days, a typical volatility band for gold is expected between $4,330 and $4,481. The probability of a downward move stands at 55%, while upward movement is estimated at 45%. Baseline scenario anticipates consolidation within this corridor, with a breakout above $4,428 potentially opening room to test higher levels, whereas a decline below $4,330 could signal further short-term weakness.

Viktoras Karapetjanc, expert at Traders Union, sees sustained official sector involvement as a key pillar for gold's long-term demand. He notes robust central bank purchases from China alongside persistent geopolitical risks, which underpin a constructive outlook despite short-term technical weakness. Gold's positioning below moving averages suggests sellers remain in control near-term, but high-level support from fundamental demand tempers downside risk. Tactical bias is for consolidation with an eye on resistance at $4,428. "If gold breaks above $4,428 in the coming days, I expect renewed bullish momentum driven by strong central bank demand and continued global risk," says Karapetjanc.

Previously it was reported that gold's short-term technical outlook had shifted to a cautiously optimistic stance, with breakout levels crucial for future direction. The current analysis highlights renewed downside momentum amid persistent resistance and underscores $4,428 as a decisive level traders should monitor for either a potential reversal or further weakness.

Source of Data: XAU Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

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