During Monday's Asian trading session, international spot gold continued to weaken in a volatile pattern, with its price retreating to around $4,080 per ounce. While escalating military tensions between the United States and Iran have somewhat heightened market risk aversion, persistently rising energy prices have intensified inflation concerns. This has prompted investors to reassess the future monetary policy path of the Federal Reserve, thereby exerting some downward pressure on gold.
The U.S. Central Command conducted additional military strikes against Iranian-linked targets on Sunday evening, aiming to further degrade Iran's capability to attack civilian vessels transiting the Strait of Hormuz. Concurrently, ongoing missile exchanges between the U.S. and Iran have once again increased tensions in the Middle East region.
The Strait of Hormuz handles approximately 20% of the world's seaborne crude oil shipments. The rising geopolitical risk has kept international oil prices elevated, renewing market concerns over future energy supply and global inflationary pressures. Rising energy costs typically elevate transportation and production expenses, increasing the persistence of global inflation. This has reinforced market expectations that the Federal Reserve will maintain a relatively tight monetary policy in the near term.
Since gold itself does not generate interest income, the opportunity cost of holding it increases when markets anticipate interest rates will remain elevated for an extended period. Consequently, some capital has flowed towards higher-yielding U.S. dollar assets and U.S. Treasury bonds, putting pressure on the gold price. The recent maintenance of relatively high U.S. Treasury yields has also capped the rebound potential for gold.
The market's focus this week will center on the U.S. Consumer Price Index (CPI) data for June. Market forecasts suggest the headline month-on-month CPI may record -0.1%, while core CPI is expected to grow by 0.3%. If the actual figures fall short of market expectations, it could signal a potential easing of U.S. inflationary pressures, potentially weakening the U.S. dollar and boosting market expectations for an adjustment in the Fed's policy pace, which would provide upward momentum for gold.
Conversely, if the inflation data demonstrates continued resilience, it could further reinforce expectations for higher interest rates, keeping gold under pressure.
Beyond inflation data, investors will also monitor remarks from Federal Reserve officials, U.S. retail sales figures, and other economic indicators such as the Producer Price Index (PPI) to be released this week, aiming to further gauge the outlook for the U.S. economy and monetary policy.
Simultaneously, developments in the Middle East situation remain a crucial variable influencing market risk sentiment. Any further escalation in military actions could lead to significantly increased volatility in gold prices.
Analyzing the Technical Outlook
From a technical perspective, spot gold on the daily chart maintains a pattern of high-level consolidation, with the price currently retreating near the main moving averages. Although the overall uptrend remains intact, upward momentum has shown signs of slowing. The MACD indicator shows its red histogram continuing to shorten, with the dual lines showing signs of further convergence.
The RSI has retreated near the neutral zone, indicating a rise in short-term market caution. If the gold price can re-establish a foothold above $4,100, it may have the potential to test the resistance zones near $4,135 and $4,160. On the downside, key support levels to watch are around $4,050 and $4,015. A decisive break below these levels could lead to a further retracement towards the psychological $4,000 mark.
On the 4-hour chart, the gold price is trading near short-term moving averages. The MACD hovers near the zero line with its red histogram continuing to narrow, and the RSI is positioned around 50, suggesting a near-term balance between bullish and bearish forces. If the U.S. CPI data disappoints market expectations, gold could potentially stage a rebound aided by a weaker U.S. dollar. If the data comes in stronger than expected, the gold price may continue to test support around $4,050 or even lower levels, with short-term volatility expected to increase noticeably.
Key Market Drivers
The gold market is currently influenced by two opposing forces: safe-haven demand and high-interest-rate expectations. While geopolitical risks continue to underpin safe-haven sentiment, inflationary pressures stemming from rising energy prices have further solidified market expectations for the Federal Reserve to maintain a high-interest-rate policy. This dynamic has become a significant factor limiting gold's upside potential.
The upcoming U.S. June CPI data will serve as a key variable for gold's short-term direction. If inflation shows further signs of cooling, gold may find an opportunity for a rebound. Conversely, if inflation proves robust, the U.S. dollar and Treasury yields may remain elevated, suggesting gold could continue to face near-term adjustment pressures.
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