Last week, the gold market was subjected to and weighed down by a triple test from macro data, Federal Reserve policy, and U.S.-Iran geopolitics, leading to a successive retreat in prices.
On the macroeconomic front, the U.S. Labor Department reported that the June CPI rose 3.5% year-on-year, significantly lower than the expected 3.8% and the previous 4.2%; it fell 0.4% month-on-month. Core CPI dropped to 2.6% year-on-year, also below the expected 2.8%. June PPI fell 0.3% month-on-month (versus an expectation of being flat), marking its first decline since last year; the year-on-year growth rate narrowed sharply from 5.5% in May to 5.5%, with core PPI year-on-year slowing to 4.7%. Following the data release, the market quickly downgraded and postponed expectations for the timing of Fed rate hikes, causing a rapid rally in the precious metals market. However, the rhetoric in the first congressional appearance by the new Fed Chair remained hawkish. While he gave no hints about the future interest rate path, he emphasized the Fed's "zero tolerance" for persistently high inflation. His hawkish stance in the Senate did not change, stating that policy tools including interest rates and the balance sheet would be re-examined, leading to another turn lower in precious metals. Additionally, U.S. retail sales and initial jobless claims data also showed strong resilience, providing grounds for the Fed's hawkish stance.
On the geopolitical front, the U.S.-Iran memorandum of understanding entered a "crisis phase," with mutual attacks continuing. Both sides indicated the Strait could be blocked again, causing crude oil prices to surge once more. Market trading briefly reverted to expectations of sticky inflation and rising interest rates, which again proved unfavorable for precious metals.
Overall, gold's current pricing logic still revolves around "geopolitics-inflation-policy-liquidity," with price action exhibiting characteristics of "geopolitical conflicts increasing inflation stickiness, hawkish policy capping upside, market sentiment easing and central bank gold buying expectations providing bottom support, while geopolitical and financial risks elevate volatility." In the short term, as the U.S.-Iran conflict finds no better resolution path and continuous clashes make it difficult to effectively alleviate market concerns about inflation and interest rates, gold is likely to be dominated by weak declines and corrective rebounds. A defensive approach is recommended to navigate the high-volatility environment. Investors should continue to monitor the U.S.-Iran conflict, Federal Reserve policy expectations, and whether overseas financial markets trigger liquidity risks under expectations of rising interest rates.
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