Last week, the COMEX gold futures main contract hit a high of $4775.2 per ounce, reaching a two-week peak. However, as Iran rejected the U.S. ceasefire proposal over the weekend, U.S.-Iran negotiations faced renewed setbacks, leading to a pullback in gold prices during Monday's session. Analysts believe that geopolitical tensions, oil price trends, and the Federal Reserve's policy path will remain the core variables determining the direction of precious metals prices. For precious metals to achieve a unilateral breakout similar to late 2025, stronger catalysts are required.
Short-term volatility does not alter the long-term upward trend. The Federal Reserve held its monetary policy meeting on April 28-29, Eastern Time, locking the benchmark interest rate in the 3.50% to 3.75% range for the third consecutive time. The outcome aligned with market expectations, but internal divisions intensified, with debates centering on the "dovish bias" in the statement's wording. The final press conference chaired by Fed Chair Powell concluded, while the nomination of Warsh as Fed Chair passed the U.S. Senate Banking Committee, bringing the power transition into clearer focus. Meanwhile, the Middle East geopolitical stalemate has pushed oil prices higher, fueling global inflation expectations. Central banks such as the Bank of Japan, Bank of England, European Central Bank, and Reserve Bank of Australia collectively signaled a neutral to hawkish stance, adding two-way disturbances to the macroeconomic environment. Each variable points to the same conclusion: precious metals have moved away from clear unilateral trends and entered a phase of consolidation, with investors advised to patiently await new catalysts.
1. The Federal Reserve's policy path becomes increasingly complex. The uniqueness of this Fed meeting extended beyond the interest rate decision itself. It marked Powell's final meeting as Chair and served as a window into the Fed's internal divisions. The voting results revealed three dissenting votes against the statement's implied further rate cuts, while Governor Milan advocated for an immediate 25-basis-point cut. The four dissenting votes made this meeting one of the most divided in recent years. During the press conference, Powell confirmed he would remain as a Fed Governor after his term as Chair ends on May 15. This decision leaves uncertainty regarding the Board's composition. The Fed currently has seven Governor seats. Powell's retention complicates the potential arrangement for the more dovish-leaning Milan to succeed him. If Powell stays, Milan may not secure a Governor seat simultaneously. This subtle shift in the power structure could intensify future policy debates within the Fed. Simultaneously, Warsh's nomination as Fed Chair passed the U.S. Senate Banking Committee on April 29, leaving only the final step—a full Senate vote. During his hearing, Warsh criticized the Fed's current communication framework and inflation measurement system, advocating for a return to "constructive ambiguity," abolishing the dot plot, adopting trimmed mean inflation indicators, and proposing an unconventional policy mix of "balance sheet reduction alongside rate cuts." However, any institutional changes require consensus within the Federal Open Market Committee. The current Board includes both Powell, representing the status quo, and other Governors inclined to maintain the current stance. Even if Warsh assumes office smoothly, his radical reforms may not be implemented overnight. It is foreseeable that future policy divisions within the Fed will expand across two dimensions: first, the philosophical differences between Powell and Warsh on governance; second, the divergence in positions among Board members due to varying political backgrounds. As Powell remains, Warsh takes over, and Milan potentially departs, the Fed's power balance is undergoing a subtle recalibration.
2. U.S. macroeconomic data releases mixed signals. Amid the Fed's internal power transition and heightened divisions, U.S. economic data has added new variables to the Fed's policy path. Regarding economic growth and inflation, U.S. Q1 GDP grew at an annualized rate of 2.0%, below expectations, with the previous quarter's figure revised down to 0.5%, indicating a clear slowdown in growth momentum. Consumption remains robust, with March Personal Consumption Expenditures (PCE) and income growth rates far exceeding expectations. Meanwhile, the March PCE price index rose 3.5% year-over-year, hitting a near four-year high; the core PCE price index remained above 3% year-over-year. Energy is the primary driver, while strong consumption and income suggest service inflation may remain stubborn. The coexistence of slowing growth and high inflation places the Fed in a dilemma: it cannot cut rates to stimulate the economy, as doing so could let inflation spiral out of control. This is the Fed's first challenge. On the employment front, multiple data points release mixed signals. For the week ending April 25, U.S. initial jobless claims fell to 189,000, the lowest since September 2022, well below the expected 215,000, indicating a tight labor market with minimal layoff activity. Additionally, April ADP private employment added 109,000 jobs, far exceeding expectations and marking the largest increase in over a year. Overall, the U.S. labor market has not been substantially impacted by Middle East geopolitical conflicts, preventing the Fed from cutting rates due to employment weakness and further raising the bar for rate cuts. This is the second challenge. In terms of sentiment indicators, the U.S. April ISM Manufacturing PMI recorded 52.7%, indicating continued expansion, but the momentum stems from inventory replenishment rather than end-demand. The Services PMI fell to 53.6%, with new orders slowing and the prices paid index remaining elevated. Once inventory replenishment ends or geopolitical tensions ease, U.S. economic downside risks may reemerge. The divergence within sentiment indicators suggests the real economy is not on solid footing. If the Fed raises rates hastily to curb inflation, it could further weaken the already fragile manufacturing and services sectors. This is the third challenge. Overall, the U.S. economy presents a contradictory pattern of "slowing growth, strong consumption and employment, high inflation, and diverging sentiment." Under these three challenges, the necessity for the Fed to cut rates in the near term has significantly diminished, with maintaining current rates and continued observation becoming the most likely option. Whether Powell remains or Warsh takes over, both will repeatedly calibrate under these macro constraints. The contradictions in economic data also explain why internal Fed divisions may persist. For precious metals, these data provide a basis for "higher-for-longer" rates, but the true driver of short-term volatility remains the frequent reversals in U.S.-Iran negotiation news. Investors should focus more on geopolitical signals rather than data alone.
3. Global central banks collectively shift to a neutral-to-hawkish stance. Against the backdrop of the Fed's internal power transition, the U.S.-Iran standoff has shifted from "military confrontation" to a prolonged, low-intensity conflict, with no progress on core issues and frequent reversals in geopolitical news becoming the norm. This "fight-and-talk" pattern poses two-way volatility risks for precious metals: when tensions ease, falling oil prices and expectations of lower rates support precious metals prices; when conflicts escalate, surging oil prices push inflation and rates higher, strengthening the dollar and weighing on precious metals. Currently, elevated oil prices and rising global inflation expectations are driving major central banks to collectively adopt a neutral-to-hawkish stance. The Bank of Japan was the first to signal a policy shift. At its April 28 policy meeting, the BOJ maintained its benchmark rate at 0.75% with a 6-3 vote, the largest division since 2016, indicating increasing internal pressure for monetary policy normalization. BOJ Governor Ueda delivered hawkish remarks at the post-meeting press conference, emphasizing the need to monitor upside inflation risks. On April 30, the European Central Bank kept rates unchanged but removed the phrase "further rate cuts if necessary" from its statement. With Eurozone inflation jumping to 3.0% in April, markets have fully priced in three rate hikes this year, with the first potentially as early as June—a stark contrast to the previously expected easing path. On April 30, the Bank of England maintained rates with an 8-1 vote, with Chief Economist Pill casting the sole dissenting vote, reflecting heightened internal divisions. U.K. CPI rose 3.3% year-over-year in March, significantly above target for two consecutive months. The BOE warned of second-round inflation effects, with markets anticipating a possible 25-basis-point hike in the second half of the year. On May 5, the Reserve Bank of Australia raised the cash rate to 4.35%, marking the third consecutive hike and fully reversing last year's easing cycle. Although a pause is likely ahead, the RBA explicitly prioritized inflation targets over other considerations, showcasing a "lone wolf" hawkish stance. The synchronized shift among global major central banks implies that the cost of holding non-yielding precious metals will remain elevated for an extended period. Although rate adjustments by other central banks have a far smaller direct impact on precious metals compared to the Fed, as a collective signal from global central banks, rising rate hike expectations will exert upward pressure on global interest rates in the near term and reinforce liquidity tightening expectations, systematically weighing on precious metals prices.
4. Short-term consolidation to continue. Looking back at late 2025, precious metals experienced a significant unilateral rally, with major global central banks, including the Fed, in a clear rate-cutting cycle, amplifying the allocation value of non-yielding assets. However, the current macro environment has reversed: the Fed is in a power transition window, with uncertainty over whether Warsh's proposed policy framework will be implemented, significantly reducing visibility on the rate-cut path; the U.S.-Iran conflict has entered a prolonged "fight-and-talk" phase with frequent geopolitical news reversals; more importantly, central banks like the BOJ, ECB, BOE, and RBA have collectively shifted to a neutral-to-hawkish stance, extending the duration of higher rates. Precious metals have lost the underlying drivers of the previous unilateral rally, entering a phase of heightened volatility and ambiguous direction. In the long term, the bullish thesis for precious metals remains intact. High U.S. debt levels suggest rates are unlikely to trend higher, with the Fed overall still in a rate-cutting channel. At a deeper level, gold serves as a trust function for the U.S. dollar debt system: when dollar credit expansion is smooth, gold underperforms; when the dollar debt system is impaired, gold's value is reassessed. Currently, the global economy remains in the fifth Kondratiev wave depression period, with heightened geopolitical risks and an ongoing monetary system reshaping far from over, providing long-term support for gold. Additionally, structural demand from global central banks' continued gold purchases remains robust. World Gold Council data shows Q1 net central bank gold purchases were the fastest in over a year. For precious metals to achieve a unilateral breakout similar to late 2025, stronger catalysts are needed, yet current policy and geopolitical landscapes lack substantial support. Amid the Fed's power transition, geopolitical volatility, and global central banks' hawkish tilt, a defensive stance is preferable to an aggressive one, and restraint is better than speculation.
Analysts: Closely Monitor U.S. Inflation Changes and Monetary Policy Path Since May, the precious metals market has been caught between geopolitical tensions and macroeconomic data. Last week, gold and silver prices generally rebounded significantly, with silver outperforming. However, with stronger-than-expected U.S. non-farm payroll data on Friday and renewed setbacks in U.S.-Iran negotiations over the weekend, market sentiment shifted rapidly, leading to a pullback in gold prices during Monday's session. Interviews revealed that last week's precious metals price increase was driven by expectations of geopolitical de-escalation, a weaker dollar and lower Treasury yields, continued central bank gold purchases, and oversold technical rebounds. The market currently faces dual disturbances from rebounding oil prices and diminished Fed rate-cut expectations. Jinrui Futures analyst Wu Zijie stated that last week's precious metals rebound was primarily driven by three factors. First, after a deep correction under high oil prices, high real rates, and geopolitical uncertainty, prices entered a phase of technical repair, with short-covering and low-level allocation funds re-entering, significantly enhancing market elasticity. Second, temporary expectations of U.S.-Iran de-escalation led markets to reassess the relationship between energy prices, inflation pressures, and Fed policy. With oil prices briefly retreating and the dollar and Treasury yields weakening, precious metals found support. Finally, the People's Bank of China continued gold purchases in April for the 18th consecutive month, reinforcing expectations of stable official demand. Haitong Futures Institute precious metals researcher Zhou Songyuan noted that against the backdrop of gold prices being suppressed by oil prices and the dollar, temporary geopolitical de-escalation provided an opportunity for bullish sentiment release. Simultaneously, some countries resuming gold reserve purchases helped shift precious metals' macro pricing logic back to a stronger track. However, market sentiment reversed quickly. Last Friday's stronger-than-expected U.S. April non-farm payroll data exerted some pressure on precious metals. Wu Zijie indicated that U.S. April non-farm payrolls added 115,000 jobs, above expectations, with the unemployment rate steady at 4.3%, reflecting labor market resilience. Wage data showed average hourly earnings rose 0.2% month-over-month and 3.6% year-over-year, indicating relatively mild wage pressures. Dongzheng Futures Derivatives Institute precious metals analyst Xu Ying stated that the U.S. labor market currently exhibits a "low hiring, low layoff" balance, with limited wage growth pressure. The Fed is more focused on the Middle East situation's impact on oil prices and inflation, with monetary policy likely remaining unchanged in June. Wu Zijie believes the April non-farm data weakened market bets on a near-term U.S. recession and rapid Fed rate cuts but did not significantly strengthen rate-hike expectations. The core constraint on Fed policy remains inflation rather than employment, so the probability of unchanged rates in June and July remains high, with rate-cut space for the year continuing to be suppressed. Zhou Songyuan noted that while the non-farm data exceeded expectations, the unemployment rate met expectations, resulting in a relatively muted market reaction. The core pricing driver for precious metals remains U.S. real rates, with subsequent inflation changes needing observation. If inflation is controlled, expectations for unexpected rate cuts may reemerge after Fed Chair nominee Warsh assumes office. Meanwhile, Middle East tensions faced renewed setbacks over the weekend. U.S. President Trump stated on social media on May 10 that he was dissatisfied with Iran's response, calling it "completely unacceptable." According to Iranian media reports on May 10, Iran rejected the U.S. proposal, believing acceptance would mean submission to Trump's excessive demands. With U.S.-Iran negotiations at a stalemate, oil prices rebounded noticeably during Monday's session, while gold prices retreated. Looking ahead, analysts generally agree that geopolitical tensions, oil price trends, and the Fed's policy path will remain the core variables determining precious metals' direction. Xu Ying stated that the Middle East situation remains the dominant market factor, with future Strait of Hormuz navigation recovery and crude oil supply-demand changes determining inflation duration and intensity. Simultaneously, Warsh's policy inclinations warrant continuous attention, as his stance on rate cuts and balance sheet size will impact overall market liquidity and precious metals performance. Wu Zijie believes subsequent core factors affecting precious metals trends lie in the relative changes between real rates and inflation expectations, particularly whether Middle East tensions, energy prices, U.S. inflation data, and Fed policy signals align. If energy prices remain elevated and boost inflation persistence, expectations of the Fed maintaining higher rates for longer will suppress precious metals valuations; conversely, if oil prices retreat and cool inflation expectations, markets may resume trading the possibility of future Fed easing, with precious metals prices supported by lower real rates and a weaker dollar. "For gold, medium- to long-term support still stems from global central bank purchases, reserve diversification, and global credit system uncertainty. Short-term prices are nearing key ranges, requiring new macro catalysts to confirm trend continuation. For silver, given its dual financial and industrial attributes, its volatility typically exceeds gold's. Subsequent focus should be on domestic and international inventory changes, term structure, industrial demand expectations, and gold-silver ratio adjustments," Wu Zijie said. Zhou Songyuan added that if the probability of new Strait of Hormuz toll regulations being implemented increases, driving oil prices lower, pressure on precious metals would significantly ease, potentially supporting further price gains. Additionally, with outgoing Fed Chair Powell's departure approaching and signs of inflation control, the possibility of unexpected rate cuts within the year should not be overlooked.
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