Gold spent most of the summer hovering near $4K an ounce, held back by a briefly hawkish Fed and a rotation into stocks. Then two tailwinds flipped the scenario.
Thanks to that, the precious metal has since surged more than 9% in two weeks, reaching its highest settlement since early June.
What flipped the trade
The shift began at the Fed’s late-July meeting, when new Chair Kevin Warsh struck a hawkish tone on inflation but stopped short of committing to a September rate hike.
Markets took that as hesitation, with fed-funds futures traders cutting the odds of a September hike to 37% from more than 70% in recent weeks.
Wednesday's CPI reading reinforced that view. Monthly inflation came in at 0.1%, with the annual rate at 3.4% and core at 2.5%. That data eased pressure on the Fed and sent gold higher the same day.
Additionally, a weaker dollar added fuel. The ICE US Dollar Index has fallen 1.2% over the past two months and was near its lowest level since mid-June. Gold is priced in dollars, so a softer greenback directly lifts its price in other currencies and increases demand.
China demand and ETF flows return
Beyond the Fed, there's a structural demand story worth watching. China's central bank added nearly 20 metric tons of gold in July, its largest monthly purchase since October 2023 and its 21st straight month of accumulation.
Western investors are also returning to gold. SPDR Gold Shares, the largest US-listed gold-backed ETF, pulled in $284M in July, its first monthly inflow since March. That momentum accelerated in August, with more than $2B flowing into the fund in just the first two weeks.
VanEck Gold Miners ETF and VanEck Junior Gold Miners ETF also saw their first net inflows since at least March.
The technical hurdle still in play
Gold remains below its 200-day moving average near $4.48K after failing to break through the key technical level.
That level matters because assets trading above their 200-day moving average are generally seen as being in a long-term uptrend. Failing to clear it keeps the rally in question.
Gold is still roughly 22% below its all-time high of $5.6K set in January. The drawdown from that record to the June 30 low was nearly 30%, one of the steepest corrections in years.
State Street's gold strategy team sees the metal climbing back toward $5k by year-end, pointing to seasonal strength and the rebound in Western inflows. But the Jackson Hole Fed meeting and broader policy developments could pull the trade in either direction.
How to size the exposure
For investors who want direct exposure, offers the most liquidity and an active options market. SPDR Gold MiniShares carries a lower 0.10% expense ratio versus's 0.40%, making it better suited for buy-and-hold. iShares Gold Trust sits in between at 0.25%.
Miner ETFs carry more risk but more upside. moved roughly three times gold's price swing last week., which tracks smaller mining companies, swung even harder. Analysts describe miners as a satellite position rather than a core holding for most individual investors.
The setup isn't a rate-cut trade. The Fed has held its benchmark rate at 3.50% to 3.75% all year. The key shift is that markets no longer expect the Fed to raise rates in September. That catalyst made gold respond exactly the way macro-sensitive assets tend to when Fed tightening pressure fades.
With the 200-day moving average still overhead and real yields still elevated near multi-year highs, clearing that technical level is the next test for whether this rally has staying power.
