Surge of 4% in a Single Day! Gold Is the "Brightest Asset" in the Overnight Market

Gold staged a strong breakout during overnight trading, becoming the most shining asset in the market.

Overnight, spot gold touched a high of $4,328.20 per ounce during the session and closed at $4,308, representing a single-day gain of 4.20%, or an increase of $173.80. This marked the largest single-day gain in five months. This move not only broke through the descending triangle consolidation pattern that had suppressed gold prices for over six weeks but also simultaneously crossed above the 20-day and 50-day moving averages, fully lighting up bullish signals on the technical front.

This rally was driven by multiple catalysts. Trump's latest remarks on negotiations to reopen the Strait of Hormuz ignited market expectations for a geopolitical premium; meanwhile, data on global central bank gold reserves in the second quarter showed expansion beyond expectations, with the Bank of Korea restarting gold purchases after 13 years being particularly noteworthy, further strengthening market confidence in sustained support from central bank demand. Notably, this sharp rise in gold prices coincided with a significant cooling in expectations for Federal Reserve rate hikes—the CME FedWatch tool shows that the probability of keeping interest rates unchanged in September has risen to 45%, the highest level in over a month.

Bullish momentum in gold is reaccumulating. The triple resonance of technical breakthroughs, central bank accumulation, and a shift in macroeconomic expectations has brought the next key resistance level of $4,400 into view.

Trump's Remarks Ignite Geopolitical Premium

The direct trigger for this round of gold price increases came from Trump's latest remarks regarding the Strait of Hormuz. According to Xinhua News Agency, Axios reported on the 4th that regional sources and U.S. officials stated that the United States, Iran, and Oman were "close to reaching" a temporary agreement to reopen the Strait of Hormuz, with the U.S. side hoping to announce the deal on the 5th.

The report stated that Trump said Iran is actively negotiating the reopening of the Strait of Hormuz. Under the proposed arrangement, Iran would manage vessels entering the strait via the northern route, while Oman would oversee vessels exiting via the southern route. An initial 60-day free transit period would be established, with the possibility of further extension.

These remarks were not without basis. Iranian officials publicly stated that they were not negotiating directly with the United States but were consulting on opening the waterway through Oman, which has long served as a mediator between Washington and Tehran. The Strait of Hormuz carries approximately 20% of the world's seaborne oil traffic, accounting for about 15% of total global oil sales, making its status crucial to the global energy market.

The heating up of geopolitical narratives provided short-term safe-haven premium support for gold and served as an important trigger for this breakthrough.

Central Bank Holdings Hit Records as Korea Returns to Market After 13 Years

Beyond geopolitical factors, structural changes in central bank demand provide more long-term significance to the bullish logic for gold in this rally.

According to data from the World Gold Council, global central banks purchased a total of 288.9 tons of gold in the second quarter, a year-on-year increase of 62%, marking the strongest second-quarter performance on record. Poland made the largest purchase, acquiring 51 tons, raising its total reserves to a historic high of 632 tons, with a target of 700 tons. Adam Glapiński, Governor of the National Bank of Poland, was straightforward: "We have been continuously buying gold, taking advantage of recent price pullbacks." China increased its holdings by 33 tons, continuing its long-term buying rhythm.

The most market-watchable development was the Bank of Korea restarting gold purchases after 13 years. Seoul stopped buying gold in 2013, coinciding with a sharp decline in gold prices, which placed enormous pressure on the Bank of Korea's book losses, leading to the then-governor being summoned to the National Assembly for questioning. However, history has provided the answer—the 90 tons of gold purchased by Korea at an average of $1,629 per ounce back then are now worth approximately $11.8 billion, about $7 billion higher than the initial purchase cost.

Although the scale of the Bank of Korea's restart of gold purchases is limited, with plans to bid only for the 4 to 5 tons of annual gold output from domestic copper and zinc smelting by-products, maintaining reserve levels at around 104.4 tons, its symbolic significance far outweighs its actual volume—this marks economies that have long been absent from the gold market re-entering the arena. Jung Hee-sub, head of the reserve management department at the Bank of Korea, stated that the decision to buy gold was not based on specific price judgments but was made after comprehensive consideration of domestic and international gold prices and market conditions.

Cooling Rate Hike Expectations Confirm Bullish Technical Signals

In addition to the two main threads of geopolitics and central banks, marginal changes in Federal Reserve policy expectations also provided macroeconomic background support for this gold rally.

The CME FedWatch tool shows that the market's expectation for the Federal Reserve to keep interest rates unchanged in September has risen to 45%, representing the lowest level of rate hike expectations in over a month. The cooling of rate expectations has reduced the opportunity cost of holding gold, further opening up upside potential for gold prices.

On the technical front, this breakthrough is also significant. Gold prices not only effectively broke through the descending triangle consolidation range that had been suppressing them since June 22 but also simultaneously crossed above the 20-day and 50-day simple moving averages—the latter being effectively broken for the first time since March. Bloomberg strategist Cameron Crise pointed out that although gold surged more than 4% in a single day, according to its traditional driver model, gold prices "should have" declined slightly, implying that there is extra momentum in this rally beyond conventional explanations.

Looking ahead, the next target for bulls is near $4,400, a level that closely aligns with the historical turning point from November to December 2025 and is also close to the 23% Fibonacci retracement level of the drop from historical highs to the recent low of around $4,020. If bullish momentum weakens, initial support levels for a pullback are sequentially the 50-day moving average at $4,243, the integer threshold of $4,200, and the downtrend line that has now turned from resistance to support at around $4,070.

Deutsche Bank analysts Michael Hsueh and Bryant Xu expect gold's year-end target price to be around $4,700, while JPMorgan, despite lowering its target, still sets the average price for the fourth quarter at $4,500. The World Gold Council holds a more conservative stance in its mid-year outlook, believing that if there are no major changes in the macro environment, gold prices will remain volatile within a 5% range around $4,100. Analysts also caution that central bank gold purchases play more of a "floor-supporting" role rather than being the main force driving significant price increases—a truly sustainable bull market still depends on the large-scale return of retail investors and funds.

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