On Wednesday, the yellow metal broke an impressive five-day winning streak but managed to hold the key psychological level of $4,600 per ounce. The correction was a symbolic 0.7%, pointing to an extremely resilient bullish trend. Investors' attention is now focused on the upcoming Jackson Hole symposium, where the Federal Reserve (Fed) chair could provide crucial hints about the future of monetary policy.
Fresh inflation data, which came in above the Fed's target level, has reignited talk of a possible policy tightening. This, in turn, has provided support to the U.S. dollar and Treasury yields, which traditionally puts pressure on precious metals. Nevertheless, gold is showing remarkable resilience, ignoring the classic negative correlation.
Budget deficit and dollar devaluation: the main drivers of the rally
The fundamental picture for gold remains extremely favorable. Since the start of the month, the metal has gained roughly 14%, and this is not just a technical bounce but a consequence of deeper macroeconomic processes. The U.S. Treasury Department's unexpected intervention in the bond market last week only added fuel to the fire, intensifying concerns about fiscal discipline.
Investors are increasingly returning to the "devaluation" scenario, seeking to protect capital from the growing budget deficit and the weakening of the U.S. currency. It is this factor that has been the catalyst for gold's record rally in 2025, when the metal posted its best performance since 1999. Technically, the price has firmly settled above the 200-day moving average, which many traders view as an unequivocal signal of a long-term trend reversal.
Confirmation also comes from institutional investors. Holdings of gold-backed exchange-traded funds (ETFs) rose by more than 28 tons over the week, the largest increase since January. This inflow, which reversed a two-month outflow that began back in the summer, points to the return of large capital to safe-haven assets.
Warsh's debut: hawk or dove?
The Jackson Hole symposium is an annual venue where central bank leaders often make pivotal statements. It was here in 2022 that the Fed announced its shift to a hawkish course. Now all eyes are on Chair Kevin Warsh, who is set to deliver his first major speech in that role on Friday.
Warsh has come under fire for what is seen as excessive secrecy regarding his economic views, and now he has the perfect opportunity to set the record straight. The market is pricing in two main scenarios. If the rhetoric is "hawkish," we will see a rise in real yields and a stronger dollar, which will put short-term pressure on gold. A "dovish" signal, however, would act as a trigger for a new leg of the rally and fresh local highs.
My view: Given the massive inflows into ETFs and resilience above $4,600, the market is already pricing in the most optimistic scenario. Any hint of a pause in policy tightening could spark a sharp spike in volatility, and in that case, gold has every chance to storm new all-time highs. However, one should not discount a "hawkish" surprise, which could quickly cool buyers' enthusiasm.