Overseas hawkish sentiment is currently the main driver, exerting short-term pressure on gold prices. Last Friday's overnight trading session saw precious metals collectively decline, with the spot price of London gold falling below $4,400 per ounce. This week, the focus is on the release of US inflation data. Influenced by geopolitical events pushing up oil prices, expectations for the year-on-year CPI figure in May have been revised upwards, while the likelihood of a Federal Reserve rate cut within the year has diminished, adding to the near-term pressure on gold.
Macroeconomic Overview
A flurry of US macroeconomic data releases is providing a dual test of economic resilience and inflationary pressures. On the economic front, the ISM Manufacturing PMI rose to 54, marking its highest level since May 2022. The New Orders Index surged significantly by 2.7 points to 56.8, remaining in expansionary territory for the fifth consecutive month. However, the Prices Paid Index remained elevated at 82.1, staying in the high-risk zone above 80 for two months in a row, indicating that energy cost pressures stemming from the Middle East conflict are being transmitted downstream. More critically, US non-farm payrolls added 172,000 jobs in May, far exceeding market expectations of 85,000, with April's figure revised up to 179,000. The unemployment rate held steady at 4.3%. Against the backdrop of resilient economic and labor market conditions coupled with persistent inflationary pressures, market expectations for Fed rate cuts have been rapidly compressed, while expectations for rate hikes have gained further traction. Several Federal Reserve officials have adopted a hawkish tone, with Governor Waller supporting the removal of language indicating an easing bias from the policy statement.
On the geopolitical front, US-Iran negotiations have reached a critical juncture, introducing uncertainty into the outlook for Middle East tensions. While former President Trump repeatedly expressed that an agreement would be reached, such expectations have so far not materialized, contributing to market volatility. Additionally, data released by the People's Bank of China on June 7th showed that China's gold reserves increased to 74.96 million ounces by the end of May, with a monthly addition of 320,000 ounces. This marks the 19th consecutive month of increases and represents the largest single-month increase since the start of the continuous accumulation in late 2024. The intensified pace of gold purchases against the backdrop of declining prices suggests a strong strategic allocation intent for the medium to long term.
Short-Term Focus for Precious Metals
The immediate core focus for precious metals is the Federal Reserve's June policy meeting. Although the market has already priced out almost any possibility of a Fed rate cut this year, with the probability of a hike instead steadily rising in market pricing, participants still hope to glean the Fed's stance on inflation and its easing outlook from the meeting. For gold, the expectation of rising US real interest rates implies persistently high holding opportunity costs. Global gold ETFs have seen continuous net outflows since May, and speculative long positions on COMEX have been significantly reduced. The market is caught in a tug-of-war between "hawkish expectation dominance" and "geopolitical safe-haven support," making it likely that gold prices will maintain a range-bound consolidation between $4,000 and $4,500 per ounce. Expectations for gold prices in the first half of the year should be further tempered. It is important to monitor whether the market exhibits abnormal "buy the rumor, sell the fact" volatility around the time of the Fed meeting, while also keeping an eye on the progress of US-Iran negotiations.
Comments