Precious metals experienced another significant sell-off in overnight trading on June 10th. The spot price of London gold fell below $4300 per ounce, marking a decline of 1.59%, while SHFE gold also trended lower, dropping by 1.51%.
Geopolitical tensions remain volatile. On the 9th, the US launched what it termed a "defensive" strike against Iran, stating the action was intended as a warning and would not disrupt the ongoing US-Iran negotiations. Furthermore, the US May CPI data is scheduled for release tonight. Energy prices are likely to continue supporting upward pressure on inflation figures. Considering the low base from May 2025, market expectations suggest a high probability that the year-on-year figure could exceed 4%. Following the April CPI data, which hit a three-year high, expectations for a Federal Reserve rate hike within the year have intensified. Coupled with the resilient non-farm payrolls data released last Friday, an unexpectedly strong May CPI reading could further bolster hawkish monetary policy expectations, putting downward pressure on commodity prices. In the short term, gold may face selling pressure.
Looking at the specifics, on the geopolitical front, former President Trump has recently frequently signaled that a US-Iran agreement will be reached "soon," stating that negotiations are in their final stages and hinting at a potential conclusion within "two or three days." He also suggested the Strait of Hormuz would reopen upon an agreement. However, the escalation in conflict between the two sides yesterday has renewed market concerns. In the near term, aside from the US-Iran talks, market focus is also centered on the upcoming Federal Reserve FOMC meeting in June. As this will be the first meeting chaired by the new Fed Chair, market attention is on the inclination towards rate hike expectations and the Chair's stance on monetary policy.
For gold, the market is caught in a tug-of-war between "hawkish policy expectations" and "geopolitical safe-haven support," leading to range-bound price action. The outlook for gold prices in the first half of the year continues to be revised downward. It is worth monitoring whether the market exhibits any "buy the rumor, sell the fact" type of unusual volatility around the time of the Fed meeting. Additionally, the latest data from the People's Bank of China shows 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 gain since the continuous accumulation began at the end of 2024. This acceleration in gold purchases against the backdrop of declining prices suggests a strong strategic allocation intent for the medium to long term.
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