- Spot gold prices retreated under pressure as the dollar rebounded. Market participants were cautious ahead of the Federal Reserve's interest rate decision and a speech by Chairman Kevin Warsh, leading to a phase of long position liquidation.
- With the US and Iran maintaining a ceasefire and a negotiation window opening in the Middle East, geopolitical risk premiums have eased, and commodities like crude oil weakened, further alleviating short-term inflation expectations.
- Traders are gradually pricing in a higher probability of future rate hikes by the Federal Reserve. The high-interest-rate environment, combined with upcoming US GDP and inflation data this week, has temporarily suppressed the safe-haven appeal of non-yielding assets like gold.
Gold Under Pressure as Dollar Rises
On Tuesday, spot gold fell 0.7% to $4,049.12 per ounce, with US gold futures also declining. The dollar index remained near a one-month high, increasing the holding costs for investors in non-dollar currencies. Capital flows indicate that, ahead of key policy events, market safe-haven funds are shifting to dollar cash, causing precious metal prices, which had rebounded for two consecutive days, to come under pressure again, remaining within a broad fluctuation range.
Interest Rate Expectations and Federal Reserve Decision
The market generally expects the Federal Reserve to hold steady at this meeting, but the variability in the interest rate path has increased. According to CME's FedWatch tool, traders are pricing in about a 40% probability of a rate hike this week, with the probability for September rising to about 80%. High borrowing costs or further increases directly raise the opportunity cost of gold, prompting some short-term leveraged funds to proactively reduce risk exposure before the interest rate decision is announced.
Geopolitical Risks and Oil Pullback
US President Trump stated that negotiations with Iran are progressing well, with both sides maintaining a ceasefire, significantly weakening the market's geopolitical risk premium. During the Asian trading session, oil prices continued to decline sharply, effectively easing supply-side inflation pressures. The cooling geopolitical situation, combined with slowing inflation expectations, has led to signs of outflows from the safe-haven funds that had previously entered the gold market.
Industrial Metals and Precious Metals Correlation
The precious metals and base metals sectors are showing a synchronized pullback. Silver prices fell 1.6% to $57.483 per ounce, and platinum dropped 0.6% to $1,612.60 per ounce. Meanwhile, copper futures on the London Metal Exchange and US copper futures both fell 0.5%. The weakening of industrial and precious metals reflects market caution regarding macroeconomic growth and key economic data such as the second-quarter GDP due this week.
