Gold Sends Overbought Signal After 103 Trading Days, Market Focuses on Tonight's CPI Data

After a strong rally that broke key technical levels, the gold market has issued a dangerous technical signal for the first time in 103 trading days.

A new report from Bespoke Investment Group indicates that gold has re-entered an overbought zone, a condition that historically suggests increasing near-term downside pressure.

Since early August, gold futures prices have rebounded nearly 9%. Spot gold prices further broke above the $4,400 mark on Wednesday (12th), reaching a high of $4,435.40 during the session—the highest level since June 5. This strong upward momentum has been driven by three key factors: weak U.S. employment data dampening rate hike expectations, consistent central bank gold buying globally, and a temporary easing of geopolitical tensions that has cooled inflation expectations.

Despite bullish market sentiment, technical indicators are flashing warnings. Bespoke Investment Group notes that gold closed above one standard deviation from its 50-day moving average last Friday—marking the first time in 103 trading days that gold has entered an overbought zone, one of the longest such periods on record without overbought conditions.

Historical backtesting shows that when gold re-enters overbought territory after more than 100 days without doing so, subsequent performance tends to be negative. On average, returns one week after this signal are -0.22%, and the probability of positive returns one year later is only about 37%. Analysts say this doesn’t necessarily mean gold will reverse, but the likelihood of continued rapid gains has diminished, and the risk of a correction has significantly increased.

Market attention is now fully focused on tonight’s release of the U.S. July CPI inflation report. This data is seen as a key catalyst that could determine gold’s next directional move. If the data is soft, it will support Fed rate cut expectations and help gold push toward $4,500. If inflation comes in stronger than expected, renewed rate hike speculation could trigger profit-taking by bulls and spark a technical pullback.

Ole Hansen, Head of Commodity Strategy at Saxo Bank,指出 that gold must hold the critical support zone between $4,360 and $4,370, or the market could enter a consolidation phase. HSBC warns of strong resistance near $4,500, suggesting bulls will need time to digest recent gains before advancing further.

Although short-term technical indicators show signs of overheating, institutions remain optimistic about gold’s medium- to long-term outlook. Sprott Asset Management highlights structural support for gold from expanding sovereign debt (with U.S. federal debt surpassing $40 trillion), central banks’ de-dollarization and reserve diversification, and geopolitical fragmentation.

At the same time, demand from Chinese buyers remains strong. The People’s Bank of China has now added gold for 21 consecutive months through July, with a single-month purchase of 640,000 ounces in July—the largest monthly buy since November 2024. Additionally, UBS has recently raised its long-term gold price target to $5,000.