Last week saw heightened volatility in the gold market, with the spot London price dropping over 2% intra-week and the SHFE gold contract declining more than 3% for the week. This week is a major one for central banks globally, with key policy meetings scheduled. The primary focus will be on the Federal Reserve's FOMC meeting, where adjustments to the quarterly dot plot and new Chair Waller's debut commentary will be critical. Additionally, a key development has been reached in US-Iran negotiations; on the evening of the 14th, the two sides concluded talks on the "Islamabad Memorandum of Understanding," which was confirmed by Iran in the early hours of the 15th. A signing ceremony is scheduled for the 19th. In early Monday trading, international oil prices opened significantly lower, while spot gold opened over 1% higher. Should inflation expectations ease, attention will turn to gold's support levels.
Macroeconomic Overview
US CPI for May rose 4.2% year-on-year, matching expectations but marking the highest level since April 2023 and a significant increase from April's 3.8%. Core CPI also matched forecasts at 2.9% year-on-year. The PPI for May climbed to 6.5% year-on-year, exceeding the expected 6.4%, with a month-on-month increase of 0.7%. Core PPI rose 5.4% year-on-year, indicating persistent inflationary pressures spreading from the production side. The preliminary June University of Michigan Consumer Sentiment Index rebounded to 48.9 from May's record low of 44.8, surpassing the market expectation of 46. However, one-year inflation expectations remain elevated at 4.6%, and households remain pessimistic about the economic outlook. On the global central bank front, the European Central Bank announced a 25 basis point rate hike on June 11th, contributing to a global tightening resonance among major central banks combating inflation. Geopolitically, the US-Iran negotiations reached a critical stage, with final talks on the "Islamabad Memorandum of Understanding" concluding on the 15th and a signing ceremony set for June 19th in Switzerland. Separately, Israeli airstrikes on Beirut, Lebanon's capital, have drawn US statements suggesting such actions are detrimental to the agreement's finalization.
Market Outlook for the Week of June 15th
The core pricing focus for the precious metals market this week will shift entirely to the Federal Reserve's June FOMC decision—marking new Chair Waller's debut. The interest rate decision and quarterly Summary of Economic Projections will be released at 2:00 AM Beijing time on June 18th. The market consensus expects rates to remain unchanged at 3.50%–3.75%. However, adjustments to the dot plot and the new chair's commentary will provide the true directional signal. It is highly probable this dot plot will shift towards signaling rate stability or even show a majority of officials anticipating hikes. If the policy statement removes language indicating the "next move is likely a cut," it would mark a shift in the Fed's policy stance from the easing cycle that began in 2024. Currently, CME markets have fully priced in no change for June, but the probability of rate cuts in July and September has been compressed to very low levels. For the gold market, this means it is in a phase where "rate hike expectations have begun to be priced in, but whether they are fully priced remains unclear," inevitably leading to choppy price action. Therefore, around this key event, a prudent approach of waiting for potential "negative news" to materialize is advised. Monitor for any "buy the rumor, sell the fact" reversals around the FOMC announcement and watch the support level for gold around $4000 per ounce.
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