Review of gold market performance and key insights:
Last week, spot gold in London closed at $4,174 per ounce (a weekly increase of 2.1%), while domestic AU9999 gold settled at 911 yuan per gram (a weekly increase of 3.8%).
The U.S. June non-farm payrolls data unexpectedly weakened, reversing interest rate hike expectations. The data released last Thursday showed that U.S. non-farm payrolls added only 57,000 jobs in June, significantly below the expected 115,000. The figures for April and May were revised down by a combined 74,000. Employment in the leisure and hospitality sector fell by 61,000, marking the largest single-month decline since 2020. Although the unemployment rate dropped from 4.3% to 4.2%, this was primarily due to a 0.3 percentage point decline in the labor force participation rate to 61.5%, rather than substantial employment expansion.
Comments from Warsh released dovish signals, acknowledging reduced inflation risks. At the European Central Bank's annual forum last week, Warsh explicitly stated that both inflation expectations and inflation risks have declined since the June FOMC meeting. As progress is made on the U.S.-Iran ceasefire agreement, Brent crude oil has significantly retreated to around $72 per barrel, easing imported inflation pressures on the U.S. If subsequent data confirms a trend of declining inflation, the logical foundation for interest rate hike expectations will be undermined.
Currently, market expectations for Federal Reserve rate hikes have reached extreme levels. However, we believe real-world conditions will constrain the scope for tightening, and excessive concerns are likely to be revised. Firstly, the U.S. economy remains in the early stages of a weak, K-shaped recovery, with middle- and low-income households facing financial pressures. Signs of weak consumer spending are beginning to dampen market sentiment, and the economic fundamentals constrain the ability to sustain rate hikes. Secondly, the current federal funds rate stands at 3.5%, already above the neutral rate of 3.1%. The policy stance is already restrictive, and further rate hikes would increase the risk of an economic downturn. Thirdly, with the implementation of the U.S.-Iran agreement and the decline in the oil price benchmark, coupled with high base effects in the second half of 2025, inflation is expected to weaken significantly in the second half of 2026. The current high inflation is more a result of temporary supply-side shocks. Fourthly, U.S. federal debt is approaching $39 trillion, with interest payments already exceeding the defense budget. A further rise in long-term interest rates above 4.5% will face the hard constraint of fiscal sustainability. Overall, market pricing for rate hikes this year may be excessive. A future correction in pessimistic expectations could provide support for a recovery in assets like gold.
Looking ahead, the June non-farm payrolls data and Warsh's dovish comments have provided gold with a temporary respite. The previously overly hawkish rate hike expectations are being revised. From a medium- to long-term perspective, the structural factors supporting gold—global central bank gold purchases, reserve portfolio rebalancing, and U.S. fiscal pressures—have not changed due to short-term fluctuations. The correction of short-term pessimistic expectations and the continuation of long-term supportive logic are expected to underpin the gold price.
Key signals for gold investors to watch in the coming week: (1) The People's Bank of China's June gold reserves; (2) U.S. June services PMI; (3) Developments in the U.S.-Iran situation.
Related Products
Gold ETF (518880) / Link A (000216) / Link C (000217)
Gold Equity ETF (159321)
Comparison of RMB-Denominated Gold and International Gold Price Trends
Data source: Wind, as of July 3, 2026.
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