As of June 12th, COMEX gold settled at $4,239.90 per ounce, marking a weekly decline of 2.62%. Meanwhile, SHFE gold closed at 911.62 yuan per gram, representing a more substantial weekly drop of 6.41%.
The latest US inflation data for May showed the Consumer Price Index (CPI) rising by 4.2% year-on-year, aligning with market forecasts and reaching its highest level in nearly three years, with energy prices being a central contributor. The core CPI, which excludes food and energy, also climbed to 2.9% year-on-year, matching expectations.
Furthermore, the US Producer Price Index (PPI) for May increased by 6.5% compared to the previous year, marking the largest rise since November 2022 and surpassing the market consensus of 6.4%. The core PPI, which strips out food and energy, rose by 4.9% year-on-year, coming in slightly below the anticipated 5.4%.
In summary, the 10.7% year-on-year surge in US energy prices for May was the primary driver behind the stronger-than-expected PPI reading. At the start of last week, as tensions between the US and Iran escalated with mutual retaliatory actions, markets aggressively priced in expectations for interest rate hikes, leading to a sharp decline in precious metals prices to their lowest levels of the year.
However, sentiment shifted by last Friday following reports that the US and Iran were nearing the signing of a memorandum of understanding. This development caused markets to dial back some of their earlier expectations for aggressive future rate hikes from the Federal Reserve, and precious metals prices subsequently recovered.
Key Headwinds for Gold
Analysts from Soochow Securities have identified current core headwinds for gold. These include: first, the possibility that major oil-purchasing nations may sell portions of their gold reserves to help stabilize their domestic currencies; and second, that rising energy prices are fueling expectations for more distant interest rate increases.
Outlook for Price Movement
The analysts suggest that if the US-Iran situation progresses toward a peaceful resolution in the coming period, precious metals prices are anticipated to experience a significant rebound.
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