Tether, a Stablecoin Giant, Now Rivals Central Banks in Gold

"Tether is no longer a niche participant, but a meaningful source of incremental physical gold demand," the Jefferies analysts wrote.

On Wednesday spot gold rose 0.7% to about $4,400 an ounce, ahead of the consumer price index report. Rate-swap markets put roughly even odds on a 25-basis-point increase at the Federal Reserve's September meeting. The inflation data will influence Fed policy direction.

Saxo Bank strategists said the market is watching whether the rally above $4,200 has the strength to test resistance near $4,460 and the 200-day moving average around $4,495. Clearing those levels, they said, would open a path toward $5,000.

Gold exchange-traded funds have drawn inflows for five consecutive sessions, lifting holdings to their highest in six weeks.

Friction around the Strait of Hormuz is hitting energy markets and underpinning demand for havens. Iranian officials say the shipping lane will remain blocked until Washington removes restrictions on Iranian port access. Higher energy costs feed into inflation and constrain the Fed's flexibility on rate cuts.

The People's Bank of China added to its reserves for a 21st consecutive month in July, lifting holdings to 76.08 million ounces. Chinese gold-backed exchange-traded funds have kept drawing inflows.

Tether has kept buying gold even while crypto markets slump. Bitcoin has fallen more than 25% year to date, while Ethereum and Solana have each lost nearly 40%.

Producer price index data is due Thursday, another inflation reading ahead of the Fed's September meeting.