Spot gold (XAU/USD) experienced a modest rebound during Friday's Asian trading session, recouping some of the previous day's losses, yet it continues to hover near its monthly lows. The broader market environment suggests the rebound's momentum remains limited. Resilient US economic fundamentals, coupled with escalating Middle East tensions driving energy prices higher, have reignited concerns over global inflationary pressures. This has further solidified market expectations that the Federal Reserve will maintain its high-interest-rate policy, consequently sustaining the US dollar's appeal to investors and exerting persistent downward pressure on non-yielding gold.
Military clashes between the United States and Iran continue to intensify, with both sides expanding the scope of their operations on Thursday. Market surveys indicate that civilian infrastructure in the southern Iranian port of Bandar Abbas, including power facilities and railway stations, has been targeted. In response, Iran has launched missile and drone strikes against targets in the Gulf region, where US allies are based. Concurrently, tensions surrounding the Strait of Hormuz have worsened, with the US strengthening its maritime blockade and intercepting commercial vessels attempting to cross the restricted area. The Strait of Hormuz handles approximately 20% of global seaborne crude oil shipments, making its security situation a constant focal point for the international energy market. Meanwhile, Iran's Revolutionary Guard has warned of potential further escalation. According to market surveys, Iran has instructed Yemen's Houthi forces to prepare for blocking energy shipping routes in the Red Sea. Fears that major global energy transit chokepoints face heightened risks have propelled international oil prices to a cumulative weekly gain exceeding 10%, reaching their highest levels in nearly a month. The sustained rise in energy prices not only increases global supply risks but also reinforces market expectations of a resurgence in imported inflation.
On the macroeconomic front, the latest US data continues to signal economic resilience. Figures from the US Labor Department show that initial jobless claims for the week ending July 11th fell to 208,000, below market expectations, indicating continued robustness in the US labor market. Simultaneously, the Philadelphia Fed Manufacturing Index for July surged to 41.4 from a previous reading of 10.3, marking its highest level since November 2021 and reflecting a significant improvement in US manufacturing activity. Indicators for new orders, production, and prices all maintained an expansionary trend.
At the same time, several Federal Reserve officials have continued to deliver hawkish signals. Dallas Fed President Lorie Logan stated that while recent consumer and producer inflation data showed some improvement, it was insufficient to confirm that inflation has sustainably returned to target levels. She emphasized the continued need for the Fed to moderately tighten monetary policy further to ensure long-term price stability. Fed Vice Chair Philip Jefferson also noted that if inflation fails to show sustained improvement in the coming months, another rate hike cannot be ruled out.
Driven by both strong economic data and hawkish rhetoric, markets continue to adjust their monetary policy expectations. Current market pricing suggests a probability nearing 75% for the Fed to implement another 25-basis-point rate hike in December of this year. The high-interest-rate environment not only keeps US Treasury yields elevated but also underpins the strength of the US dollar index, significantly constraining gold's potential for a meaningful rebound.
However, the gold market is not entirely devoid of support. As Middle East tensions persist, global demand for safe-haven assets remains. Gold may still attract periodic capital inflows whenever conflicts escalate further or risks to energy transportation intensify. Consequently, the current gold price action primarily reflects a tug-of-war between high-interest-rate pressure and safe-haven demand, with a near-term outlook likely to remain weak and range-bound.
Market focus will now shift to upcoming US data releases, including building permits, housing starts, industrial production, the University of Michigan Consumer Sentiment Index, and inflation expectations. Attention will also remain on speeches from Federal Reserve officials. If economic data continues to show strength, expectations for a prolonged period of high interest rates could intensify further, continuing to support the dollar and limit gold's upside. Conversely, any signs of an economic slowdown could temper the dollar's rally and provide some breathing room for gold to recover.
From a technical perspective, gold's daily chart shows the price remains within a descending channel, consistently pressured by long-term moving averages, indicating the overall medium-term corrective structure remains unchanged. Although the MACD indicator shows signs of a low-level recovery and bearish momentum has weakened somewhat, a definitive bullish crossover has not yet formed, suggesting the market's rebound strength remains limited. Momentum indicators also reflect a narrowing bearish advantage, but the overall trend remains biased to the downside. Immediate upside resistance is observed near the $4,050 upper boundary of the descending channel. A decisive break above this level could pave the way for a test of the significant long-term moving average resistance zone around $4,150. On the downside, key support lies near the $3,900 lower boundary of the channel. A sustained break below this level would further confirm the continuation of the bearish trend and potentially open the door for more significant declines.
Observing the 4-hour chart, gold's recent rebound appears primarily as a technical correction within the broader downtrend, with the price still not breaking free from the short-term declining pattern. The MACD on this timeframe shows a weak recovery, indicating some buying interest has returned, but its sustainability requires further confirmation. Short-term moving averages are beginning to flatten, suggesting the market is entering a phase of directional indecision. If the price can establish a firm footing above $4,050, a short-term challenge of higher resistance zones becomes possible. Conversely, if the price falls back below recent lows and breaches the $3,900 support, bearish forces could regain strength, and gold may seek lower support levels.
In summary, escalating US-Iran conflict is driving international oil prices higher, rekindling global inflation risks. Concurrently, persistently strong US employment and manufacturing data, coupled with hawkish signals from multiple Fed officials, have collectively reinforced market expectations that the high-interest-rate environment will persist for an extended period. This has kept the US dollar on a strong footing, applying sustained pressure on gold. Meanwhile, geopolitical risks continue to provide some safe-haven demand for gold, making a one-sided collapse in the near term unlikely. Future market focus will remain centered on US economic data, Federal Reserve policy expectations, and developments in the Middle East. Gold is expected to continue oscillating between safe-haven support and dollar strength, with a near-term outlook likely to remain weak and range-bound.
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