HG MARKETS: 

Gold (XAU/USD) extended its bullish momentum after breaking above the technically important 200-day SMA.The precious metal climbed to its highest level since late May during Friday’s European session.Gold is also on track to post gains for the third consecutive week.The rally has been supported by broad weakness in the US Dollar.A softer USD continues to make gold more attractive to global investors.

The US Dollar remains near a three-month low as markets reduced expectations of an immediate Fed rate hike.Recent US inflation data showed signs of easing price pressures.This has supported demand for the non-yielding precious metal.Lower expectations for near-term rate increases are weighing on the dollar.As a result, gold has maintained a strong upward bias.

However, rising oil prices are creating fresh inflation concerns for markets.The US-Iran standoff over the Strait of Hormuz has increased geopolitical uncertainty.Reports of attacks on oil tankers have also raised concerns about wider regional tensions.Higher oil prices are supporting elevated US Treasury yields.This could limit further gains in gold by reducing pressure on the USD.

The July FOMC minutes showed that some Fed officials favored raising rates if inflation does not cool further.Markets are still pricing a significant probability of at least one Fed rate hike by year-end.This expectation could provide some support to the US Dollar.A stronger dollar would normally reduce demand for gold.Therefore, monetary policy expectations remain an important risk for the bullish gold outlook.

Geopolitical tensions in the Middle East continue to provide support for gold’s safe-haven appeal.US pressure and sanctions against Iran have kept uncertainty elevated.Any further escalation could increase demand for defensive assets such as gold.At the same time, geopolitical risks may also trigger renewed USD buying.This creates a mixed environment for gold despite its current bullish momentum.

Overall, gold remains technically strong after moving above the 200-day SMA.Weakness in the US Dollar and geopolitical uncertainty are the main bullish drivers.However, elevated oil prices, Treasury yields and potential Fed rate hikes could limit further upside.Traders will closely monitor upcoming US economic data for clues about monetary policy.Gold’s ability to sustain levels above the 200-day SMA will remain key for further gains.