- The draft agreement on the navigation of the Strait of Hormuz has been reached, reducing the risk of global energy supply disruptions. International oil prices have significantly fallen, alleviating medium- and short-term inflation concerns, and the market's expectations for further tightening of monetary policy by the Federal Reserve have cooled.
- Spot gold (XAU/USD) prices remain volatile near the high of $4,262.54 per ounce. The implied probability of a rate hike in September has quickly dropped from 67% at the beginning of the week to around 55%, substantially relieving the holding cost pressure of non-interest-bearing assets.
- The simultaneous decline in U.S. Treasury yields and the dollar index provides support for capital preference. Although Federal Reserve officials have warned of the resilience risk of inflation, after a technical breakthrough of key resistance levels, the precious metals sector, including gold and silver, continues its bullish trend.
geopolitics and rate expectations
Expectations for the Federal Reserve's monetary policy have marginally eased due to the easing of Middle East tensions. The draft agreement on the navigation of the Strait of Hormuz proposed by Iran and Oman effectively curbs the oil premium, directly reducing the necessity for the Federal Reserve to maintain high interest rates as commodity inflation pressures weaken. Interest rate futures market pricing shows that the probability of a rate hike in September has quickly corrected from a high of 67% this week to 55%. This marginal policy shift reduces the opportunity cost of non-interest-bearing assets, providing a favorable macro backdrop for the overall revaluation of precious metals.
energy risk premium decay
The rapid decline in the energy risk premium has led to a structural differentiation of safe-haven funds. As oil prices fall, easing high inflation expectations, long positions in crude oil are orderly transferred to the precious metals market. Although some profit-taking funds chose to cash in after spot gold broke through $4,260, the overall selling pressure is limited. The market generally views the decline in oil prices as a positive signal to ease overall liquidity tightening, thereby supporting gold in establishing a new price support hub near a seven-week high.
treasury yield and dollar movement
The downward trend in the U.S. Treasury yield curve and the weakening of the dollar index create a favorable resonance. The continuous pullback in U.S. Treasury yields directly enhances the relative attractiveness of gold (XAU:US) and silver (XAG:US). Driven by expectations of a slowdown in the Federal Reserve's rate hike path, capital further favors assets with inflation-resistant and safe-haven attributes in cross-asset allocation. Even though Federal Reserve Governor Cook warns that the cooling of inflation may still be volatile, the market liquidity premium continues to support gold prices at high levels.
labor market signaling preview
Labor market data has become the core variable for short-term pricing. Following the slowdown in ADP private sector employment growth, the upcoming non-farm employment data will directly test the resilience of the U.S. macroeconomy. If the job market cools down rapidly, expectations for the Federal Reserve to pause rate hikes or even turn to rate cuts will be further strengthened; if the data is unexpectedly strong, high interest rate expectations may trigger a short-term technical pullback. Funds generally remain on the sidelines before the release of non-farm data, pushing gold prices to maintain high-level consolidation above technical resistance levels.
