Gold prices surged sharply in the afternoon of August 5, igniting the precious metals sector across the board. London spot gold rebounded sharply during trading, hitting an intraday high of $4,179 per ounce, a gain of approximately 2.4%, and was last reported at $4,156 per ounce. COMEX gold futures also strengthened, with the main contract reaching $4,238 per ounce. The domestic market in China mirrored this rally, with the main Shanghai gold futures contract surging to 910.4 yuan per gram, up 3.1%. The A-share precious metals sector saw an explosive reaction, with Sichuan Gold Co., Ltd. (001337.SZ) and Shengda Resources Co., Ltd. (000603.SZ) both hitting their daily upward limits, while Xiaocheng Technology Co., Ltd. (300139.SZ) surged nearly 12%. Multiple other stocks in the sector also followed the upward trend.
"The core driver behind this sharp rally is the rising expectation of the Strait of Hormuz reopening to navigation," noted a senior precious metals trader. The market is repricing Middle Eastern geopolitical risks, and gold, as the ultimate safe-haven asset, has become the biggest beneficiary. According to reports from Axios cited by Xinhua News Agency, the United States, Iran, and Oman are "close to reaching" a temporary agreement to reopen the Strait of Hormuz, with the U.S. hoping to announce it on August 5. Guoxin Futures analyzed that the positive progress in U.S.-Iran negotiations has led to a sharp drop in international oil prices, which has marginally eased market concerns about inflation, providing support for precious metals. However, the firm also cautioned investors that the situation in the Middle East remains volatile, details of the strait navigation plan are still being negotiated, and geopolitical risks have not completely dissipated. Factors such as the Bank of Japan's lack of intervention in the foreign exchange market and the U.S. plan to expand the scope of tariff products are also adding to market sentiment disturbances.
The expectations of the strait reopening have triggered a stark contrast between gold and oil prices. While gold surged, the international crude oil market suffered a heavy blow. On August 5, the main Brent crude oil futures contract dipped to a low of $78.11 per barrel, its lowest closing level since July 10. The main WTI crude oil contract hit a low of $74.2 per barrel. Since the start of this week, both Brent and WTI crude oil have fallen more than 11%, while the main domestic SC crude oil futures contract closed down nearly 5.8%. The gold-to-oil ratio has consequently widened. Based on August 5 data, the ratio has climbed to approximately 53 times, far exceeding the historical average range of 15 to 25 times. A macro market analyst noted that the seesaw relationship between gold and oil prices persists, with oil prices significantly impacting inflationary pressures in the global economy. If a clear roadmap for further de-escalation of the Middle East situation emerges, gold prices could continue to rise. Goldman Sachs believes that before a new U.S.-Iran agreement is confirmed or a regional conflict escalates significantly, Brent crude oil prices will likely trade within a range of $80 to $90 per barrel. The bank estimates the fair value of Brent spot prices at around $80 per barrel, suggesting the current market only prices in a moderate risk premium.
This sharp rally has prompted the market to reconsider a core question: Is the $4,000 level a temporary bottom? A research report from CITIC Securities on August 5 stated that gold prices have surged and then fallen sharply since the start of the year, with the current pullback nearing historical extremes. The price level around $4,000 per ounce is likely the bottom area for this cycle. CITIC Securities believes that the impact of the Strait of Hormuz situation on gold will shift from suppression to support. The Federal Reserve's monetary policy may be more optimistic than the market expects, and combined with the U.S. defense spending surge pushing up the deficit, the bank expects gold prices to re-enter an upward channel within the year. Looking at a longer-term horizon, Citigroup predicts that under a baseline scenario, gold prices will climb to $4,500 by the fourth quarter of 2026 and reach $5,000 by the first half of 2027. TD Securities believes that once the oil market stabilizes and inflationary pressures ease, gold prices could recover to around $5,200 by the end of the year. Overall, structural support remains. According to the latest statistics from the World Gold Council, central banks and other official institutions globally added a net 289 tons of gold reserves in the second quarter, a 62% year-on-year increase. Gold buying activity has picked up in several countries. The People's Bank of China remains one of the most active official gold buyers globally, purchasing gold for 20 consecutive months, setting a record for the longest continuous buying cycle. As of the end of June, China's official gold reserves stood at 2,346 tons, accounting for 8% of its total foreign exchange reserves. Recently, the Bank of Korea resumed physical gold purchases after 13 years, acquiring gold from domestic smelters through over-the-counter block trades, with a plan to expand gold's share in its foreign exchange reserves over the medium to long term. However, short-term uncertainties have not completely dissipated. The U.S. non-farm payrolls report for July, due out on Friday, will be a key variable. If employment and wage data both come in stronger than expected, the market will reduce its bets on rate cuts, strengthening U.S. Treasury yields and the dollar, which would pressure gold. Conversely, weak data would support gold. Guotai Junan Futures analyzed that the expectation of a Fed rate hike has not been fully eliminated, and internal divisions are intensifying. The employment and inflation data for August will directly influence market expectations for the September meeting. On the other hand, geopolitical uncertainties remain high, with risks related to the actual control of the Strait of Hormuz and shipping disruptions still present, meaning the risk premium from the volatile situation has not completely faded. The Middle East situation remains in flux. Zhengxin Futures also believes that while the overall U.S.-Iran situation is cooling, gold will likely continue to fluctuate in the short term around the U.S.-Iran situation, energy prices, and U.S. employment data. Orient Futures, however, suggests that given the strong performance of the service sector during the World Cup and the previous manufacturing PMI indicating a recovery in employment, the July non-farm payrolls report is expected to support the Fed in maintaining its current stance, making it difficult to provide a sustained upward momentum for gold.
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