Gold Prices Hit Two-Month Highs Amid US Economic Weakness

Gold prices rose for three consecutive sessions between August 17 and August 18, with spot gold reaching $4,424.28 per ounce and December futures climbing to $4,480.90. The rally was initially driven by a weakening U.S. dollar and disappointing economic indicators, including a decline in July nonfarm payrolls, weak retail sales, and lower consumer price inflation.

These data points reduced market expectations for a September interest rate hike by the Federal Reserve System. According to the CME FedWatch tool, the probability of a rate increase dropped to 33% from 47% a month prior. Central bank purchases, particularly from China, further supported the recovery of gold above the $4,000 threshold.

Price momentum accelerated on Tuesday as gold's safe-haven appeal grew following a diplomatic breakdown between the United States and Iran. A senior Iranian official stated that Iran would shift to a "fully offensive" military posture after Washington declined to extend a temporary ceasefire and negotiations for a permanent end to the war stalled. Investors are now awaiting the release of the Federal Reserve's July policy meeting minutes on Wednesday for further guidance on monetary policy.