The fundamental driver behind this gold rebound lies in revised Federal Reserve policy expectations triggered by falling U.S. inflation data. The July U.S. CPI came largely in line with market consensus. Core CPI year‑on‑year dropped to 2.5%, the lowest reading since February this year, easing near‑term risks of inflation re‑acceleration. Meanwhile, July U.S. employment figures missed expectations and the unemployment rate edged higher, signalling a gradual cooling of the U.S. labour market. These two key sets of data have scaled back market bets on another rate hike at the September FOMC meeting. Gold is a non‑interest‑bearing asset. U.S. Treasury real yields and the U.S. Dollar Index serve as its two core pricing anchors. Declining inflation dragged real U.S. Treasury yields lower and the U.S. dollar weakened on a temporary basis, creating upward momentum for gold prices.
 

Nevertheless, market views on the Fed’s policy path remain sharply divided, and no consistent easing expectation has been formed. At the end‑July FOMC meeting, the federal funds rate was held steady at 3.50%‑3.75%. Nine votes favoured keeping rates unchanged, while three votes called for an immediate 25‑basis‑point rate hike. This marked the first occurrence of three hawkish dissenting votes of the same stance since 2016, highlighting severe internal divisions within the Federal Reserve. Presidents of the Cleveland, Dallas and Minneapolis Federal Reserve Banks repeatedly emphasised that inflation has not yet reached the 2% target and refused to rule out future additional rate increases. The Fed Chair sticks to a data‑dependent stance, offering no pre‑set explicit policy guidance and stating that policy decisions will hinge on upcoming economic indicators. Such ambiguous messaging amplifies global market uncertainty, triggering sharp swings in U.S. Treasury yields and the U.S. dollar index. Gold prices fluctuate violently as a result, making a one‑sided uptrend hard to materialise. Rate futures price in steady rates for September as the baseline scenario, yet non‑negligible odds for a December hike remain. Should inflation surprise to the upside again, rate‑hike expectations will rapidly resurface and place substantial downward pressure on gold.
 

Geopolitical risks remain an indispensable supportive factor for gold’s safe‑haven demand. U.S.‑Iran tensions in the Middle East have not reached a fundamental resolution. Risks surrounding shipping lanes in the Strait of Hormuz and the Red Sea continue to weigh on market sentiment. Even when tensions ease temporarily, seeds of local frictions and military confrontation linger. Should conflicts flare up again, crude oil supply will be disrupted, oil prices will surge, worries over inflation resurgence will mount, and chain‑reaction impacts will spill over to Fed policy judgements. Geopolitics exert two‑sided influences. Sharp escalation of tensions draws safe‑haven buying to lift gold prices; once situations improve, risk premiums vanish rapidly and gold tends to fall in the short run. Short‑term volatility triggered by geopolitical news has become noticeably frequent. Investors need to guard against price jumps sparked by sudden news events.
 

Central‑bank gold purchases worldwide represent the most powerful medium‑to‑long‑term underpinning for gold prices. They do not fuel short‑term spikes, but absorb selling pressure during corrections and curb steep declines. According to World Gold Council quarterly reports, global net central‑bank gold purchases totalled 288.9 tonnes in Q2 2026, rising 62% year‑on‑year and setting a Q2 all‑time high. The People’s Bank of China added another 640 000 ounces of gold in July, lifting gold reserves to 76.08 million ounces, marking the 21st consecutive month of increases. Even amid sharp gold price falls in Q2, the central bank maintained steady buying to optimise foreign‑reserve structures and reduce reliance on a single currency. Global surveys of central banks show nearly half intend to expand gold holdings over the next 12 months, and 89% believe global official gold reserves will keep growing. Multiple emerging‑market economies carry out strategic purchases, and official buying puts a solid floor under gold prices.
 

In terms of capital flows, investment funds have flowed back into gold alongside price rebounds. Speculative long positions have recovered on COMEX gold futures, with previously‑exited capital returning. SPDR, the world’s largest gold ETF, has halted continuous liquidations and switched to successive net buying. In domestic markets, capital inflows into major gold ETFs have expanded, with several products returning to the hundred‑billion‑yuan scale. Asset‑allocation funds have shifted from previous selling to gradual gold accumulation. That said, risks of sharp pullbacks driven by profit‑taking are embedded after rapid short‑term long‑position build‑ups; this is not a one‑way bull market. In Q2, global gold ETFs saw outflows of 45 tonnes, with prominent outflows in North America. In a high‑rate environment, Western investors’ sentiment toward gold is prone to shifts. Once rate‑hike concerns resurface, investment capital may flee quickly and become a major source of short‑term market turbulence.
 

Outlooks among large financial institutions diverge. Deutsche Bank keeps its year‑end gold target at $4600. JPMorgan forecasts gold may test the $4500 level in Q4. Standard Chartered points out that gold could challenge $5000 amid geopolitical risks and central‑bank buying. Still, most institutions warn that given the large short‑term run‑up, corrections may lie ahead, and consolidation down to the $4200‑4300 range is plausible. Warnings are also issued: if U.S. inflation rebounds beyond expectations and the Fed resumes rate hikes, gold will face heavy downward pressure.
 

Key events to monitor going forward include: U.S. PPI Producer Price Index, weekly initial jobless claims, and the Jackson Hole Global Central Bank Symposium at the end of August, the biggest second‑half focal point. The Fed Chair’s speech will deliver critical policy signals. Past editions of this symposium have reshaped global asset pricing. Hawkish rhetoric will push Treasury yields higher and weigh on gold; dovish signals may unlock further upside for bullion. Surprise readings in subsequent monthly CPI and employment reports can trigger drastic gold swings.
 

On the physical‑consumption front, global jewellery demand remains relatively weak. Domestic jewellery consumption is sluggish, whereas investment demand for gold bars and coins stays solid. Physical buying in Asia offers partial downside support. Seasonally, August‑September typically sees stronger gold demand, yet macro‑policy forces dominate, so seasonal factors only play a secondary role.
 

To sum up, multiple forces are counterbalancing in today’s gold market. Falling inflation serves as a tailwind, yet Fed internal divisions mean rate‑hike risks have not been fully eliminated. Geopolitical risks generate safe‑haven demand, but premiums evaporate as tensions subside. Sustained central‑bank buying underpins the medium‑to‑long‑term floor, while fast‑in‑fast‑out speculative capital amplifies volatility. Bullish and risk factors are intertwined, high volatility will persist, and no clear one‑sided trend has been established. Price trajectories are heavily subject to U.S. economic data and Fed officials’ remarks. Continuous monitoring of macro signals is required.