International spot gold prices experienced a pullback last week (May 11-15), ending the week with a decline of over $170, a drop of 3.75%. The weekly K-line closed in negative territory. This was primarily driven by a surge in energy prices fueled by the U.S.-Israel-Iran conflict, which led to a broad acceleration in U.S. inflation data, with several key indicators reaching multi-year highs. Consequently, market expectations for a Federal Reserve interest rate hike intensified, pushing U.S. Treasury yields and the U.S. dollar higher in tandem.
Looking ahead to the new week, the risk of renewed conflict between the U.S., Israel, and Iran remains a focal point for market attention due to geopolitical tensions. As "rate hike" expectations heat up, the final meeting minutes of the "Powell era" are set to be released, putting the $4,500 per ounce level for spot gold to the test.
The risk of renewed conflict between the U.S., Israel, and Iran has escalated sharply, with the geopolitical situation remaining a key focus. As U.S.-Iran negotiations reached a stalemate, discussions between the U.S. and Israel about the possibility of resuming military action against Iran have increased the risk of renewed conflict in the Middle East, leading to another significant rise in international oil prices towards the end of last week.
According to a report from Iran's Tehran Times on the 15th, the U.S. has rejected Iran's written "14-point" proposal to end the war. Separately, Iran's Fars News Agency reported on the 17th that the U.S. responded with five conditions, including not paying war reparations to Iran, demanding the transfer of 400 kg of enriched uranium to the U.S., allowing Iran to maintain only one nuclear facility in operation, refusing to unfreeze Iranian assets, and stipulating that any ceasefire on all fronts must be conditional on the commencement of negotiations. Analysts cited in the report suggested that the U.S. proposal does not aim to fundamentally resolve the dispute but rather seeks to achieve through negotiations objectives it failed to accomplish via military action.
On the military front, Israeli Defense Minister Yoav Gallant stated on the 14th that Israel is prepared for the possibility of needing to resume military operations against Iran soon.
In response, Iranian Parliament National Security and Foreign Policy Committee spokesman Ebrahim Rezaei said on social media on the 12th that if Iran is attacked again, it may raise its uranium enrichment level to 90%. Furthermore, according to Iranian media reports on the 17th, a senior spokesman for the Iranian armed forces responded to recent statements by U.S. President Donald Trump regarding Iran, warning the U.S. against launching new military actions. The spokesman added that if the U.S. renews military threats or actions against Iran, U.S. military assets and personnel in the region will face a "new, offensive, surprising, and stormy response."
Overall, if the Middle East conflict remains unresolved, gold still faces significant downside risks.
A new round of robust U.S. data has sharply increased the probability of a Federal Reserve rate hike within the year. While geopolitical tensions continue to push oil prices higher and pressure gold prices, the latest series of strong U.S. economic data has boosted market expectations for a Fed rate hike this year. This led to collective gains in the U.S. dollar and Treasury yields last week, further dampening bullish sentiment in the gold market.
Specifically, U.S. retail sales for April showed a month-on-month increase of 0.5% (in line with expectations but lower than March's growth) and a year-on-year rise of 4.9% (better than expected), reflecting resilient consumer spending. The latest U.S. inflation data indicated that the Producer Price Index (PPI) rose 6% year-on-year in April, while the Consumer Price Index (CPI) increased to 3.8% year-on-year, further deviating from the Fed's 2% inflation target.
Against this backdrop, the market has increased bets on a rate hike before year-end. According to the CME FedWatch Tool, the probability of the Fed maintaining rates in June is 99.2%, with a 0.8% chance of a cumulative 25-basis-point rate cut. For July, the probability of unchanged rates is 95.0%, with a 0.7% chance of a cumulative 25-basis-point cut and a 4.2% chance of a cumulative 25-basis-point hike.
Market performance further reflects the "rate hike" expectations. The 2-year U.S. Treasury yield, particularly sensitive to interest rate policy, rose to 4.079% last week, significantly above the Fed's policy rate ceiling of 3.7%. The U.S. Dollar Index rose for four consecutive days, breaking through the key psychological level of 99 and reaching its highest point since early April.
Amid rising market expectations for a rate hike, gold is under clear short-term pressure, with the $4,500 per ounce level facing a test. In the near term, gold and silver face risks of further declines due to Fed rate hike expectations, a stronger U.S. dollar, and technical pressures. However, long-term structural supportive factors such as central bank gold purchases globally, geopolitical risks, and de-dollarization remain in place.
In the new week, the latest meeting minutes will be released, providing investors with insights into the intensity of discussions within the Fed's hawkish camp and officials' inclinations regarding potential rate adjustments in June.
Technically, gold prices face resistance on the upside and may test the $4,500 per ounce level. Technically, gold failed to effectively break above $4,750 per ounce and instead turned downward under pressure from rising U.S. dollar and Treasury yields, putting the support level around $4,500 per ounce to the test. If this level is breached, gold prices face further downside risks. This week, short-term resistance for gold is expected in the $4,560-$4,600 per ounce range, with key resistance in the $4,680-$4,710 per ounce range. Short-term support lies in the $4,530-$4,500 per ounce range, with key support in the $4,400-$4,350 per ounce range.
In the short term, gold is oscillating within the $4,500-$4,750 per ounce range. Key downside support is around $4,350 per ounce, while key upside resistance is around $4,800 per ounce. However, gold remains above the 10-month moving average and within a zone of multiple supports, including the daily 200-day moving average, indicating that the long-term uptrend remains robust. A breakthrough above the $6,000 per ounce level before year-end remains a plausible expectation.
Domestically, short-term resistance for Shanghai gold is in the 1,020-1,050 yuan per gram range, with key resistance in the 1,080-1,100 yuan per gram range. Support lies in the 1,000-980 yuan per gram range, with key support in the 950-920 yuan per gram range. For Shanghai silver, resistance is in the 19,500-20,500 yuan per kilogram range, with key resistance in the 21,500-22,000 yuan per kilogram range. Support is observed in the 19,000-18,500 yuan per kilogram range, with key support at 17,500-17,000 yuan per kilogram.
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