The metal is showing breakout signals after July consolidation, though it remains more than 25% below its January peak and some analysts say its defensive role has weakened since the pandemic.
Gold rose more than 2% intraday and moved toward a key $4,200 resistance level after spending July in a tight range, with traders reading the move as a possible technical breakout. The metal is still more than 25% below its all-time January highs, but repeated rebounds from $4,000 support suggest the next major test may be higher, especially after the Federal Reserve left interest rates unchanged. Higher borrowing costs typically weigh on non-interest-bearing bullion because they increase the opportunity cost of holding it, while persistent energy-led inflation has kept investors uneasy about the rate outlook. Bloomberg News cited Samantha Dart, co-head of global commodities research at Goldman Sachs, saying the backdrop for gold improved somewhat after the Fed meeting, though she cautioned that the market was not fully clear of risk. Longer term, a University of Cape Town Department of Finance and Tax study found gold's safe-haven and hedging role weakened after the COVID-19 pandemic, particularly against U.S. financial and industrial stocks, with its protective value becoming more sector-specific. The report said corn and soybeans retained modest safe-haven traits, while wheat was less consistent and livestock lost much of its defensive appeal. On the technical side, gold has swung sharply, correcting by more than $1,600 within months before stabilizing, while the SPDR Gold Trust (NYSE:GLD) is down 6.06% year-to-date. A bullish divergence in the Relative Strength Index (momentum gauge) on July 16 suggested selling pressure was fading. Traders are now watching $4,200 as the first hurdle and $4,375 as the larger resistance zone after that level shifted between resistance and support from last October through June.