Spot gold briefly surged to around $4,082 per ounce at the start of trading on Monday, before pulling back to the $4,020 level, eventually closing at $4,055.34, down 0.22%. August-delivery gold futures settled at $4,090.50, a decline of 0.4%. On the surface, this appears to be a minor adjustment, but it reflects the intense interplay of multiple factors: the unresolved Middle East conflict, volatile crude oil prices, resurgent inflation expectations, and highly uncertain Federal Reserve policy directions. Gold has been oscillating within the narrow range of $4,000 to $4,200 for over a month, with each geopolitical "feint" testing market patience and pricing logic. In early Asian trading on Tuesday, spot gold continued to consolidate near $4,050. The market remains focused on further developments in the Middle East, while the U.S. June JOLTS job openings data, due later today, will also be a key point of investor attention.
Trump's "Cancelled Attack" and Iran's Firm Denial: Safe-Haven Sentiment Repeatedly Dissipated
The direct trigger for gold's recent rally and subsequent decline was U.S. President Trump's sudden weekend decision to call off a "large-scale strike" on Iran, claiming the two sides would hold negotiations. This statement quickly pushed gold prices higher early Monday, as the market briefly interpreted it as a de-escalation of the conflict and a temporary easing of safe-haven demand. However, Iran swiftly denied the claim. An Iranian Foreign Ministry spokesperson explicitly stated that there are currently no negotiations with the U.S. and no plans for any meetings. All relevant negotiators are in the country, with the only ongoing discussions being routine technical contacts with Oman regarding the management of the Strait of Hormuz. Trump subsequently accused Iran of "extreme hypocrisy" on social media, reiterating Washington's "complete control" over the Strait of Hormuz. He warned that unless an agreement is reached or a full surrender is made, "nothing will get through." This contradictory exchange almost perfectly mirrors the pattern of the past five months of conflict: Trump repeatedly threatens military action, only to withdraw the threat under the guise of diplomatic engagement; meanwhile, Iran, since the breakdown of the memorandum of understanding in June, has publicly refused direct negotiations with Washington. The conflict is trapped in a cycle of repeated escalation and temporary de-escalation, which continuously erodes safe-haven sentiment. As a traditional safe-haven asset, gold struggles to form sustained upward momentum in an environment rife with such "feints." Each temporary cooling of the conflict prompts some capital to shift from gold to other risk assets, while the price quickly finds support again if tensions rise. The market currently tends to view the Middle East situation as a long-term "background noise" rather than a decisive factor capable of immediately pushing gold prices above $4,200.
Oil Price Rollercoaster and the Shadow of Resurging Inflation: Gold's Core Support Logic Remains Unchanged
Running almost in parallel with gold's price fluctuations is the intense volatility in the crude oil market. Last month, as the U.S.-Iran conflict reignited and multiple oil tankers were attacked near Oman, Brent crude futures prices surged over 20%. On Monday, following news of Trump's decision to delay the strikes, Brent crude plunged about 7% to a three-week low, settling at $83.77 per barrel. U.S. crude also fell over 5%. While this sharp decline in oil prices temporarily alleviated market concerns about runaway energy costs, analysts generally believe it may be another "feint" within the conflict. If the war continues or manifests as a long-term standoff, restrictions on navigation through the Strait of Hormuz and surrounding areas will continue to provide upward support for oil prices. Consequently, inflation risk has become one of the core supporting logics for gold. Marex analyst Edward Meir noted that gold has been oscillating between $4,000 and $4,200 for over a month. The market anticipates that inflation may resurface, with July data likely reversing most of the decline seen in June. The U.S. July ISM Manufacturing PMI rose to 55.6, a four-year high, with improvements in new orders and employment indices. However, supplier delivery times lengthened, and the prices paid index remained high at 71.1, indicating that supply chain pressures and rising costs have not truly subsided. In corporate feedback, price volatility and the Iran war were frequently cited, with some manufacturers stating that current conditions are even more challenging than during the pandemic. The Fed kept interest rates unchanged last week, but three committee members publicly advocated for a rate hike. New York Fed President Williams also stated that the Fed is prepared to act if inflationary pressures do not ease. The market currently prices in approximately a 68% probability of a rate hike in September. In this environment, gold's attribute as an inflation-hedging asset is being re-emphasized. Even if prices fall in the short term due to geopolitical easing, they still have strong medium-to-long-term support.
Dollar Recovery and the Employment Data Window: Short-Term Trading Disruptors
The U.S. dollar index recovered from lows on Monday, briefly hitting a one-and-a-half-month low of 99.42 before closing at 99.96, up about 0.17%, ending a four-day losing streak. A temporary easing of geopolitical tensions typically weakens the dollar's safe-haven appeal while supporting the euro and yen. However, analysts point out that the U.S. Treasury reportedly intervened using the euro, aiming to avoid signaling a desire for a generalized weakening of the dollar. The stabilization of the dollar has exerted some pressure on gold prices, as gold, priced in dollars, often faces headwinds when the dollar strengthens. The other market focus this week is U.S. employment data. The ADP employment report and nonfarm payrolls data are scheduled for release, with economists expecting around 80,000 new jobs in July. This data will directly influence market judgment on the Fed's policy path. Strong employment data could further reinforce rate hike expectations, putting short-term pressure on gold prices. Conversely, weak data might alleviate tightening concerns, offering a respite for gold. Meanwhile, the Bank of Korea announced it would purchase gold from domestic producers to diversify supply sources and increase reserves. Although limited in scale, this move signals continued official sector gold accumulation, providing marginal support to market sentiment.
Range-Bound Trading Likely to Persist; Breakout Requires Clearer Catalysts
In summary, the current oscillation pattern in gold prices is no accident. The repetitive nature of the Middle East conflict has eroded the sustainability of safe-haven premiums. The oil price rollercoaster has caused inflation expectations to swing between "easing" and "resurging." The high degree of uncertainty in Fed policy further amplifies market hesitation. Gold has established a firm foothold above $4,000, but to effectively break through $4,200 and open upward space, clearer catalysts are needed. This could be a genuine long-term escalation in the Middle East that pushes up oil and inflation, a clear signal of a dovish Fed policy pivot, or a further expansion of global central bank gold purchases. Until then, the market is more likely to continue seeking equilibrium within the range. Each "posturing tug-of-war" between Trump and Iran, each sharp oil price swing, and each release of employment data will serve as triggers for short-term volatility. For investors, rather than chasing every geopolitical "feint," it may be more beneficial to focus on the actual inflation path and the Fed's true reaction function. Gold's long-term narrative remains intact, but short-term trading rhythm is dominated by the complexity of the Middle East conflict and the vacillation of policy expectations. In this uncertain August, every pullback in gold prices might be building strength for the next more powerful rebound.
Comments