Galaxy Securities has released a research report, stating that from a medium to long-term perspective, gold still holds strategic allocation value. However, a sustained upward trend would require a renewed decline in real interest rates and a moderation in U.S. dollar pressure. The current medium-term support for gold continues to stem from central bank purchases globally, U.S. fiscal debt expansion, recurring geopolitical risks, and uncertainties in the U.S. dollar's credit system. In particular, negotiations between the U.S. and Iran, shipping in the Strait of Hormuz, and Middle East security arrangements have not been fully resolved, which may still periodically elevate safe-haven demand. However, in an environment where the Federal Reserve is emphasizing policy discipline, U.S. inflation is resurging, and U.S. Treasury yields remain elevated, gold faces challenges in returning to a sustained upward trajectory in the short term. It is expected to trade within a wide range at high levels, primarily undergoing valuation rebalancing. Going forward, key focus will be on PCE data, non-farm payrolls, wage growth, and Federal Reserve commentary. Only if inflation confirms a downward trend and expectations for interest rate hikes cool, will gold prices potentially regain upward momentum.
Key Economic Events from Last Week
U.S.-Iran Tensions Resurface, Strait of Hormuz Risks Re-emerge
In late June, following the signing of a memorandum of understanding, the first round of U.S.-Iran talks initially made progress. Preliminary consensus was reached on issues such as ensuring the Strait of Hormuz remains open, initiating negotiations for a final agreement, ending the war in Lebanon, allowing Iranian oil sales, and unfreezing Iranian assets. The U.S. Treasury also issued a general license, temporarily easing sanctions on Iranian oil for 60 days. However, on June 25, Iran attacked the cargo ship "Ever Lovely" using a one-way attack drone, citing violations of Strait of Hormuz passage rules. Subsequently, the U.S. Central Command struck Iran, and Iran's Islamic Revolutionary Guard Corps claimed to have targeted multiple U.S. military deployments in the region. These military actions mark the first such incidents since the signing of the memorandum, indicating that while the agreement has eased expectations of full-scale war and extreme supply disruptions, significant vulnerabilities remain in its implementation. In the short term, rules for passage through the Strait of Hormuz, vessel inspections, Iranian oil sales, and U.S. military countermeasures have once again become core variables for pricing crude oil, shipping, and safe-haven assets. The logic of declining risk premiums following the earlier drop in oil prices may see periodic reversals. Over the medium to long term, issues such as nuclear concerns, security guarantees, sanctions relief, the situation in Lebanon, and Strait of Hormuz arrangements remain unresolved. Middle East risks will shift from military conflict to ongoing negotiations over agreement implementation, shipping order, and regional security architecture, continuing to influence crude oil pricing, inflation expectations, and gold valuation.
U.S. Inflation Rebounds, Limiting Expectations for Monetary Easing
On June 26, the U.S. Commerce Department released the May PCE price data. The U.S. May PCE price index rose 4.1% year-on-year, the highest level since April 2023. The core PCE increased 3.4% year-on-year, in line with market expectations but also reaching its highest level since October 2023. Concurrently, the final estimate for first-quarter U.S. real GDP annualized growth was revised up from 1.6% to 2.1%, indicating continued economic resilience. However, May durable goods orders fell 4.5% month-on-month, the largest decline in nearly a year, reflecting a marginal weakening in manufacturing and capital expenditure momentum. Overall, the U.S. economy is in an environment characterized by "growth not yet significantly decelerating, inflation pressures resurging, and corporate investment showing divergence." This further undermines the basis for the Federal Reserve to pivot quickly towards easing in the near term. The market had previously anticipated that the U.S.-Iran agreement might push oil prices lower, thereby easing energy inflation and real interest rate pressures. However, the PCE rebound suggests that inflation stickiness is not solely due to short-term energy disruptions; service prices, wage costs, tariff pass-through, and housing costs may still slow the pace of inflation decline. In the short term, U.S. Treasury yields and the U.S. dollar index are likely to remain supported, constraining precious metals and high-valuation growth assets due to real interest rate pressures. Over the medium to long term, with the Federal Reserve emphasizing policy discipline and inflation data rising again, the Fed's policy path will become more reliant on subsequent PCE, non-farm payroll, and wage data. Market pricing for interest rate cuts will require further adjustment.
Tariff Threats Resurface, Digital Tax Frictions Intensify
In late June, former U.S. President Donald Trump threatened that if any country imposes a digital services tax on U.S. technology companies, their exports to the U.S. could face 100% tariffs, specifically naming several European countries. Digital services taxes typically target the world's largest and most profitable technology platform companies, with U.S. tech giants like Meta Platforms Inc, Alphabet Inc, and Amazon.com Inc being primary targets. This has long been a key issue in U.S.-Europe trade frictions. The U.S. using high tariffs as a countermeasure indicates that trade friction is extending from traditional goods trade, manufacturing tariffs, and industrial subsidies to areas like digital economy taxation, technology platform regulation, and cross-border profit allocation. In the short term, tariff threats may increase uncertainty regarding the implementation of U.S.-Europe trade agreements, creating disturbances for Eurozone exporters, tech regulatory policies, and market risk appetite. If relevant countries insist on advancing digital services taxes, the U.S. may use tariff pressure as a bargaining chip, while Europe may need to re-evaluate the balance between tax sovereignty and trade stability. Over the medium to long term, global digital economy rules are still being reshaped, and conflicts involving the global profit allocation of U.S. tech giants, national tax sovereignty, data governance, and platform regulation are unlikely to be quickly resolved. For asset allocation, tariff and digital tax frictions will increase compliance costs for multinational tech companies and may exacerbate policy divergence between the U.S. and Europe. The boundaries of global trade friction are expanding from the flow of goods to data, algorithms, platforms, and pricing power for digital services.
Political Turmoil in the UK, Pressure on Europe Intensifies
On June 22, UK Prime Minister Keir Starmer announced his resignation as leader of the Labour Party, stating he would continue as Prime Minister until a successor is chosen. Over the past decade, six UK prime ministers have left office, with frequent political changes reflecting a long-term lack of stable consensus on issues such as fiscal constraints, public services, immigration governance, industrial policy, and foreign relations. Currently, the UK remains in an environment of high interest rates, high inflation, and weak growth. Rising political uncertainty may undermine policy continuity and corporate investment confidence, while also increasing risk premiums for pound-denominated assets. In the short term, the market will focus on the selection of the new Labour Party leader, whether fiscal policy will continue, potential adjustments to public spending arrangements, and whether the Bank of England can maintain policy independence amid inflation pressures. For Europe as a whole, the UK's political turmoil intertwines with Eurozone growth slowdown, energy price disruptions, digital tax frictions, and trade pressures, leaving European assets facing the policy dilemma of "fighting inflation" versus "stabilizing growth." On one hand, inflation stickiness and energy risks limit the ability of the European Central Bank and the Bank of England to pivot quickly towards easing. On the other hand, sluggish manufacturing recovery, limited fiscal space, and political uncertainty weaken economic growth resilience. Over the medium to long term, European risks are not confined to political changes in a single country but are structural pressures stemming from fiscal discipline, industrial competitiveness, energy security, and the trade environment. European equity, bond, and currency assets may continue to be repriced between policy expectations and political risks.
Performance of Global Major Assets
From June 22 to June 26, global asset performance revolved around "recurring U.S.-Iran agreement implementation issues, strengthening U.S. inflation stickiness, cooling AI trading congestion, and repricing of U.S. dollar interest rates." In the commodities sector, despite localized mutual attacks following the U.S.-Iran memorandum, expectations for the U.S. temporarily easing Iranian oil sanctions and the resumption of Iranian crude exports increased, coupled with global demand concerns, leading to a continued significant decline in oil prices. Precious metals were pressured by the rebound in U.S. May PCE, rising expectations for Fed rate hikes, and a stronger U.S. dollar, with silver experiencing a larger decline. In equity markets, most global stock indices declined, with technology and growth styles under more significant pressure. This was primarily due to AI trading congestion, sharp volatility in South Korean stocks, memory price increases passing through to end consumers, and narrowing room for Federal Reserve policy easing, collectively weighing on high-valuation assets. In rates and foreign exchange, while U.S. inflation stickiness strengthened, risk appetite declined, and falling oil prices eased reflation pressures, leading to a notable decline in the 10-year U.S. Treasury yield. The U.S. dollar index continued to strengthen against the backdrop of Fed policy discipline and pressure on non-U.S. assets, with the euro weakening and the Chinese yuan and Japanese yen depreciating slightly against the dollar. In domestic Chinese assets, major A-share indices corrected, with volatility amplifying in technology/growth and previously strong sectors; Chinese government bond yields edged slightly higher. Specifically in equity markets, most indices fell. The Ho Chi Minh Index rose 2.60%, the UK's FTSE 100 rose 1.40%, the Dow Jones Industrial Average rose 0.60%, India's SENSEX 30 rose 0.39%, and Singapore's FTSE Straits Times Index fell slightly by 0.02%. European markets faced pressure: France's CAC 40 fell 0.43%, Germany's DAX fell 1.26%, and the Eurozone STOXX 50 fell 1.31%. U.S. tech-heavy indices saw notable corrections: the S&P 500 fell 1.95% and the Nasdaq Composite fell 4.60%. Asia-Pacific markets were mixed: Japan's Nikkei 225 fell 2.65%, Hong Kong's Hang Seng Index fell 5.24%. In A-shares, the ChiNext Index fell 1.37%, while the Shanghai Composite Index and Shenzhen Component Index both fell 1.55%. In commodities, CBOT Soybeans rose 1.07%, NYMEX Natural Gas rose 0.89%, and DCE Iron Ore rose 0.27%. SHFE Rebar fell 1.31%, CBOT Corn fell 1.35%, LME Zinc fell 1.59%, LME Copper fell 2.01%, COMEX Gold fell 3.37%, CBOT Wheat fell 4.11%, LME Aluminum fell 5.84%, NYMEX WTI Crude Oil fell 7.40%, ICE Brent Crude fell 8.06%, and COMEX Silver fell 10.79%. In foreign exchange, the U.S. Dollar Index rose 0.60%, USD/CNH rose 0.33%, USD/JPY rose 0.27%, GBP/USD rose 0.15%, and EUR/USD fell 0.76%. In rates, the 10-year U.S. Treasury yield fell 8.00 basis points, while the 10-year Chinese Government Bond yield rose 0.15 basis points.
Precious Metals
During the week of June 22 to 26, gold prices fluctuated and declined. As of June 26, COMEX gold futures settled at $4,078.70 per ounce, down 3.43% for the week; spot London gold settled at $4,088.87 per ounce, down 1.66% for the week. The U.S. May PCE year-on-year increase to 4.1% and core PCE to 3.4%, coupled with the upward revision of the first-quarter GDP final estimate, indicate continued U.S. economic resilience and inflation stickiness, further weakening the basis for the Federal Reserve to pivot quickly towards easing in the near term. Market expectations have shifted from pricing in rate cuts to maintaining high rates or even additional hikes, with the U.S. dollar and real interest rates putting pressure on gold. Although the U.S. and Iran engaged in renewed mutual attacks after signing the memorandum, and the risk of Strait of Hormuz passage resurfaced, which should have supported safe-haven demand, the market focused more on Federal Reserve policy discipline and position unwinding pressure. Several major international banks downgrading their gold price outlooks also amplified the correction in gold. Over the medium to long term, gold still holds strategic allocation value, but a sustained upward trend requires a renewed decline in real interest rates and moderation in U.S. dollar pressure. The current medium-term support for gold continues to stem from central bank purchases globally, U.S. fiscal debt expansion, recurring geopolitical risks, and uncertainties in the U.S. dollar's credit system. In particular, U.S.-Iran negotiations, shipping in the Strait of Hormuz, and Middle East security arrangements have not been fully resolved, which may still periodically elevate safe-haven demand. However, in an environment where the Federal Reserve is emphasizing policy discipline, U.S. inflation is resurging, and U.S. Treasury yields remain elevated, gold faces challenges in returning to a sustained upward trajectory in the short term. It is expected to trade within a wide range at high levels, primarily undergoing valuation rebalancing. Going forward, key focus will be on PCE data, non-farm payrolls, wage growth, and Federal Reserve commentary. Only if inflation confirms a downward trend and expectations for interest rate hikes cool, will gold prices potentially regain upward momentum.
Crude Oil Market
During the week of June 22 to 26, crude oil prices fell significantly. As of June 26, WTI crude oil futures settled at $71.99 per barrel, down 10.65% for the week; Brent crude oil futures settled at $69.23 per barrel, down 9.57% for the week. Following the signing of the U.S.-Iran memorandum, the first round of talks made progress on issues such as opening the Strait of Hormuz, Iranian oil sales, and asset unfreezing. The U.S. Treasury temporarily eased sanctions on Iranian oil for 60 days, boosting market expectations for the return of Iranian crude. Simultaneously, Iraq initially created noise around OPEC production quotas before clarifying its stance, and OPEC gradually restoring some production quotas reinforced the judgment of marginal easing on the supply side. Although the U.S. and Iran engaged in renewed mutual attacks on June 25, and the risk of Strait of Hormuz passage temporarily resurfaced, it did not alter the market's primary focus on agreement implementation and the resumption of crude oil exports. Coupled with the rebound in U.S. PCE, weakening durable goods orders, and the continuation of a high-interest-rate environment, demand-side expectations remained cautious, ultimately leading to a decline in oil prices. Over the medium to long term, crude oil prices will continue to be repriced around the dual themes of "supply recovery" and "geopolitical disturbances," with a trend towards potential downward pressure on the price center. If the 60-day U.S.-Iran talks progress, Iranian crude exports gradually resume, the Strait of Hormuz remains open, and OPEC faces increasing internal production coordination pressure, improving global crude oil supply will continue to suppress oil prices. On the demand side, strong U.S. inflation stickiness and the Fed maintaining policy discipline mean the global high-interest-rate environment will continue to constrain manufacturing, transportation, and end-consumption, which is also unfavorable for sustained oil price increases. However, the decline in oil prices will not be smooth; rules for Strait of Hormuz passage, the Iranian nuclear issue, the pace of sanctions relief, and localized U.S.-Iran military friction may still bring periodic risk premium rebounds.
Bond Market
During the week of June 22 to 26, U.S. Treasury yields fell significantly. As of June 26, the 2-year U.S. Treasury yield settled at 4.07%, down 12 basis points for the week; the 10-year U.S. Treasury yield settled at 4.38%, down 8 basis points for the week. Although the U.S. May PCE year-on-year increase to 4.1% and core PCE to 3.4% indicate strong inflation stickiness, providing little basis for the Fed to pivot quickly towards easing in the near term, the market's pricing of the inflation rebound was more concentrated in short-term policy rates. For the long end, the 4.5% month-on-month decline in May durable goods orders, sharp volatility in tech stocks and South Korean equities, and corrections in most major global stock indices reinforced concerns about slowing future growth momentum and increased risk asset volatility. Concurrently, the initial market reaction to the U.S.-Iran memorandum pushed oil prices significantly lower, marginally easing energy inflation pressures and lowering long-term inflation expectations. Although renewed U.S.-Iran attacks brought safe-haven-related disturbances, they primarily manifested as capital flowing back into safe assets like U.S. Treasuries, pushing the 10-year yield lower. Over the medium to long term, U.S. Treasury yields are likely to remain elevated with high volatility, lacking sufficient conditions for a sustained downward trend. On one hand, U.S. core inflation remains high, with the PCE re-acceleration and the Fed's emphasis on policy discipline making it difficult for the Fed to signal easing quickly. Short-term rates will remain constrained by the risk of rate hikes and expectations of high rates being maintained for longer. On the other hand, weakening U.S. manufacturing and durable goods orders, rising tech stock volatility, and cooling global risk appetite will strengthen demand for long-term bonds as a portfolio allocation, limiting the upside for yields. The future direction of U.S. Treasuries will depend on whether inflation or growth dynamics dominate. If PCE, wage, and service inflation continue to show strength, U.S. Treasury yields may see periodic rebounds. If employment and consumption data further cool, long-term yields may have room to decline.
During the week of June 22 to 26, Chinese government bond yields fluctuated with mixed performance. As of June 26, the 1-year Chinese Government Bond yield settled at 1.13%, down 4.25 basis points for the week; the 10-year Chinese Government Bond yield settled at 1.73%, up 0.15 basis points for the week. The decline in short-term rates was mainly influenced by central bank liquidity support. In June, the MLF operation was increased by 200 billion yuan, and the central bank announced new overnight reverse repo operations, implementing the interest rate control optimization measures proposed at the Lujiazui Forum, which eased market concerns about quarter-end funding conditions. Medium to long-term yields showed relative divergence. On one hand, the continued recovery in May industrial enterprise profits, margin financing balance exceeding 3 trillion yuan, and still-supported equity market risk appetite imposed some constraints on long-term rates. On the other hand, the uneven recovery slope in the property sector and domestic demand, coupled with increased volatility in overseas risk assets, meant that allocation demand still supported government bonds. Overall, the Chinese bond market did not exhibit a clear trend this week, instead fluctuating in pricing between improved liquidity, weak fundamental recovery, and rebounding risk appetite. Over the medium to long term, Chinese government bond yields are likely to continue their low-volatility pattern. Short-term rates will be primarily influenced by central bank liquidity injections and funding cost levels, while long-term rates will depend on the pace of economic recovery, fiscal stimulus, and equity market risk appetite. Currently, the domestic economy remains in a stage of structural recovery, with improvements in high-tech manufacturing and industrial profits supporting fundamentals. However, consumption, property, and private investment still require further policy support, limiting the basis for a sustained, sharp rise in long-term rates. Concurrently, policies such as the "15th Five-Year Plan" for energy, equipment renewal, auto consumption, and stabilizing foreign investment are being rolled out, which will help improve growth expectations and also limit further downside for the bond market. Going forward, if signals for credit easing strengthen, and equity market turnover and leverage continue to heat up, the 10-year Chinese Government Bond yield may face periodic pressure. If property and consumption recovery remain moderate and liquidity conditions stay stable, bonds will still have allocation demand.
Foreign Exchange Market
During the week of June 22 to 26, the U.S. Dollar Index fluctuated and closed higher, while major non-U.S. currencies generally closed lower. As of June 26, the U.S. Dollar Index settled at 101.36, up 0.60% for the week; EUR/USD settled at 1.14, down 0.76% for the week; GBP/USD settled at 1.32, down 0.24% for the week; USD/JPY settled at 161.75, up 0.27% for the week; and the USD/CNY central parity rate settled at 6.82, up 0.05% for the week. The core reason for the U.S. dollar's strength this week was the renewed strengthening of U.S. inflation stickiness. The U.S. May PCE year-on-year increase to 4.1% and core PCE to 3.4%, along with the upward revision of the first-quarter GDP final estimate, led the market to further confirm the lack of basis for the Federal Reserve to pivot quickly towards easing in the near term. The emphasis on policy discipline by the Fed also strengthened support from U.S. interest rates. The euro faced pressure mainly due to the U.S. dollar rebound, intensifying U.S.-Europe digital tax and tariff frictions, and weak European growth momentum. The British pound's decline was relatively limited, but rising political uncertainty following UK Prime Minister Keir Starmer's resignation announcement weighed on the pound. For the Japanese yen, the Bank of Japan's previous rate hike provided some support, but the continuation of expectations for high U.S. interest rates kept the U.S.-Japan interest rate differential, leading to a slight rise in USD/JPY. The slight depreciation of the Chinese yuan's central parity was mainly influenced by the stronger U.S. dollar index. However, intensive domestic policy announcements, the implementation of measures to stabilize foreign investment, and increased attractiveness of renminbi assets kept overall yuan volatility relatively contained. Over the medium to long term, the U.S. Dollar Index is likely to remain elevated with high volatility, lacking a solid foundation for a sustained unilateral decline. On one hand, resurgent U.S. inflation and strong core PCE stickiness make it difficult for the Fed to send clear easing signals in the short term, providing interest rate support for the dollar. On the other hand, weakening U.S. durable goods orders, increased tech stock volatility, and long-term fiscal pressures will also limit significant further upside for the dollar. For non-U.S. currencies, the euro remains constrained by European political uncertainty, digital tax frictions, and weak growth. If tariff pressures intensify further, the euro's recovery potential may be limited. The British pound's future depends on the selection of the new UK Prime Minister, fiscal policy continuity, and Bank of England policy signals. Although the Japanese yen has a basis for medium-term recovery, pressure for depreciation is difficult to completely alleviate before the U.S.-Japan interest rate differential narrows significantly. For the Chinese yuan, short-term fluctuations are influenced by U.S. dollar strength, but with continued progress in domestic policies to stabilize growth and foreign investment, as well as capital market reforms, the exchange rate is expected to exhibit two-way volatility.
Equity Markets
During the week of June 22 to 26, global stock markets were generally weak, with resource-related markets showing relative resilience, technology and growth sectors under clear pressure, and volatility amplifying in Asian tech supply chains. This week's market disturbances primarily stemmed from three factors: First, the rebound in U.S. May PCE inflation, with core PCE remaining high, further cooled market expectations for the Federal Reserve to pivot towards easing in the near term. High real interest rates pressured high-valuation technology assets. Second, renewed mutual attacks between the U.S. and Iran after signing the memorandum, and the resurfacing of Strait of Hormuz passage risks, increased uncertainty for risk assets, although oil prices overall still declined. Third, valuation and liquidity pressures from crowded AI trades began to unwind, leading to significant adjustments in technology sectors in South Korea, Japan, the Nasdaq, and Hong Kong. The view is that this week's global equity performance does not represent a systemic collapse in risk appetite but rather a structural repricing driven by the combined effects of high interest rates, inflation rebound, and crowded AI trades. Specifically, Brazil's IBOVESPA Index rose 2.95%, the UK's FTSE 100 rose 1.40%, the Dow Jones Industrial Average rose 0.60%, and India's SENSEX 30 rose 0.39%. Major European indices were mixed: France's CAC 40 fell 0.43%, Germany's DAX fell 1.26%; Australia's S&P/ASX 200 fell 0.73%. Both A-shares and U.S. stocks corrected: the Shanghai Composite Index fell 1.55%, the S&P 500 fell 1.95%, and the Nasdaq Composite fell 4.60%, indicating that high-valuation growth assets faced more pronounced pressure. Asian tech-related markets saw larger adjustments: Japan's Nikkei 225 fell 2.65%, Hong Kong's Hang Seng Index fell 5.24%, and South Korea's KOSPI fell 7.08%. In terms of specific U.S. stock sectors: Healthcare rose 7.90%, Real Estate rose 3.96%, Utilities rose 3.91%, Consumer Staples rose 1.52%, Energy rose 0.73%, Industrials rose 0.50%, and Financials rose 0.48%. Materials fell slightly by 0.12%, Consumer Discretionary fell 2.72%, Information Technology fell 5.40%, and Communication Services fell 6.22%. Looking ahead, U.S. stocks may continue to exhibit a structurally differentiated pattern in the short term, with index-level upside potential constrained by the combined effects of high interest rates, inflation stickiness, and crowded tech trades. On one hand, the U.S. economy remains resilient, corporate earnings have not shown systemic deterioration, and AI capital expenditures, semiconductors, cloud computing, memory, and advanced manufacturing remain long-term industrial themes. U.S. stocks are not entering a phase of sustained weakness. On the other hand, the May PCE rebound reinforces the necessity for the Fed to maintain policy discipline. With the Fed emphasizing this stance, it is difficult to send clear easing signals in the near term, limiting the valuation expansion space for high-valuation tech stocks. Subsequently, the market will focus more on earnings delivery, capital expenditure efficiency, and cash flow quality.
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