Last week saw heightened volatility in the gold market, with spot gold in London falling over 1% cumulatively, while the domestic SHFE gold posted a weekly gain exceeding 2%, with trading halted on Friday due to the Dragon Boat Festival holiday.
Precious metals are currently grappling with the impact of a hawkish shift from the Federal Open Market Committee (FOMC). The Fed's policy stance for the 2024 easing cycle is undergoing a fundamental transformation, with markets beginning to price in one potential interest rate hike this year, with expectations pointing to September as the earliest possibility.
As a non-yielding asset, gold continues to face pressure amid rising rate expectations. London spot gold has once again declined to around $4,150 per ounce, further undermining the confidence of long position holders.
However, current gold prices have largely absorbed much of the hawkish sentiment, and the marginal downward momentum appears to be waning.
Furthermore, as US-Iran negotiations proceed, market attention is also focused on navigation issues in the Strait of Hormuz, suggesting geopolitical tensions could escalate.
Additionally, a retreat in crude oil prices, if accompanied by stagnant inflation expectations (data), could potentially trigger a short-term market recovery driven by easing concerns over monetary tightening.
In summary, gold is expected to maintain a range-bound pattern near its recent lows, with expectations for significant upside gains being further moderated.
Macroeconomic Developments
The Federal Reserve announced its interest rate decision in the early hours of June 18, Beijing time, holding the federal funds rate steady at 3.50%-3.75% for the fourth consecutive meeting, with the decision passed unanimously by a 12-0 vote.
The significant shock, however, stemmed from new Chair Warsh's "debut"—the policy statement was drastically condensed to approximately 130 words, omitting key forward guidance phrases like "further adjustments" that previously hinted at a dovish bias.
Moreover, the dot plot exhibited a pronounced hawkish tilt. Among the 18 officials submitting forecasts, nine projected at least one rate hike in 2026. Notably, Chair Warsh became the first Fed leader in 14 years not to submit a dot plot forecast.
The Fed substantially revised its 2026 PCE inflation forecast upward from 2.7% to 3.6%, core PCE from 2.7% to 3.3%, while downgrading its GDP growth forecast from 2.4% to 2.2%.
Geopolitical Factors
On June 14, former President Trump announced the "completion" of a US-Iran agreement, with Iran's Supreme National Security Council confirming the finalization of a ceasefire memorandum of understanding, which was signed remotely by both parties on the 18th.
However, on June 20, the Iranian military unexpectedly announced the closure of the Strait of Hormuz, citing ongoing Israeli attacks on Lebanon and the US failure to fulfill ceasefire commitments. Although US officials insisted the strait remained open, the incident highlighted the "fragility" of the memorandum.
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