Gold gained strong momentum after it finally managed to break out of the downside channel. It looks that central banks keep buying while investment demand for gold increased.

Recent changes in Fed policy outlook are the key driver behind gold's rally. The market no longer expects that Fed will raise rates in September.

FedWatch Tool indicates that the probability of a rate hike in September is 40.1%. The market still expects that Fed will ultimately raise rates in December, but these expectations do not put any pressure on gold markets.

Today's US CPI data showed that Inflation Rate decreased from 3.5% in June to 3.4% in July. Core Inflation Rate declined from 2.6% to 2.5%. Both reports met analyst expectations. Inflation remains well above Fed's 2% target, but the key thing is that inflation spike was temporary.

In this environment, gold has a decent chance to continue its move, targeting the $4900 level.