Gold still up 10% in August despite late-month whiplash

Can gold resume its rally after a sharp late-August sell-off?

Just five sessions from the August month-end, gold was up 15% for the month and on track for its best monthly performance since September 1999. A dual setback in the final days of August took some of the shine off, leaving it up a still respectable 10%, its best month since January 2026.

The catalyst for gold's rally in early August was renewed optimism that a diplomatic breakthrough in the Middle East was close. On 5 August, Trump said talks had run all day and that 'the Strait of Hormuz is going to be open very soon', which would have meant lower oil prices and less pressure on central banks to raise rates.

Gold's gains were added to in mid-August after the US Treasury said it would at least double the size of its long-term bond buybacks. That, combined with US national debt topping $40 trillion, swiftly revived fiscal and credibility concerns and ushered back the 'debasement trade', pushing gold to a 15-month high of $4697.

The fall from that point has been swift, with gold dropping about $300, or 6.3%, into yesterday's low of $4396.

Hawkish repricing dents gold's momentum

The sell-off was sparked at the end of last week after Federal Reserve (Fed) Chair Kevin Warsh sounded hawkish in his maiden Jackson Hole speech. He said the Fed's 2% inflation target is non-negotiable and that, while recent personal consumption expenditures (PCE) and consumer price index (CPI) readings were better than expected, they do not confirm that underlying inflation trends have meaningfully improved.

That was followed by yesterday's escalation in the Strait of Hormuz, which prompted a sharp rise in the oil price and revived inflation worries. The impact of those twin events has forced a hawkish repricing in the US interest rates market. There are now 18 basis points (bp) of hikes priced for the 16 September Fed meeting, with a cumulative 60 bp priced between now and June 2027.

The rising chance of a hike in just over two weeks has undercut conviction in the debasement trade's revival and left investors questioning what comes next for gold. To that end, the path of the current flare-up in the Middle East will matter, as will two key data points: Friday night's August non-farm payrolls report and next week's August CPI release.

Gold technical analysis

In our last update on gold in our early June note here, we warned that a sustained break below support at $4400 - $4360 would open the way for gold to retest, and possibly break, the March low at $4098. That scenario played out, with gold falling to a low of $3942, an almost 30% correction from its all-time high near $5602.

Signs of basing at the $3942 low were followed by an impressive rebound that took gold back above the 200-day moving average (MA) on its way to last week's high of $4697.

Last week's retreat below the 200-day MA at $4529 has done some short-term technical damage, but it has not changed the medium-term view that gold based at the late-June low of $3942.

The preference remains to buy pullbacks, leaning against the June $3942 low, while looking for a push towards the next upside target at $4900 - $5000.

Gold daily candlestick chart

• _{Source: TradingView. The figures stated are as of 1 September 2026. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}