Daily Gold Commentary | Bears Dominate the Current Market, $4,500 Remains the Focus

On the fundamentals, the Federal Reserve’s Beige Book showed that 10 out of 12 districts recorded slight to moderate growth, but a strong signal of secondary inflation was released regarding inflation, which became the key factor suppressing rate-cut expectations.

The rise in energy costs related to the Middle East conflict is currently the primary source of price pressure, and has already spread widely to everyday consumer goods such as groceries via segments like transportation and fertilizers. This cost-push inflation has led to squeezed corporate profit margins, and U.S. April inflation data has surged from 3.5% in March to 3.8%. Coupled with the labor market being stuck in a liquidity stalemate of low hiring and low firing, the Federal Reserve’s policy dilemma has deepened: it must prevent inflation expectations from becoming unanchored but dare not raise rates easily for fear of bursting the fragile consumption bubble.

The market reacted quickly, and the probability that the Federal Reserve will keep rates unchanged in June is now near 100%, with even slight expectations of a rate hike emerging. The new chairman, Kevin Walsh's hawkish stance, is likely to be supported by the data.

For gold, this Beige Book creates a typical tug-of-war trend. On one hand, persistent inflation and broken rate-cut dreams are a short-term drag on international gold prices. In a context of rising inflation rather than recession, the Federal Reserve is expected to maintain high interest rates longer than anticipated, which will support the dollar and real rates, weakening the appeal of non-yielding assets like gold and causing international gold prices to remain under pressure in volatile trading. On the other hand, the geopolitical risks and endogenous fragility revealed in the report provide a firm bottom for international gold prices. Energy inflation driven by the Middle East conflict directly reinforces safe haven logic, while intensified consumption stratification and heightened corporate caution hint at potential downside risks for the economy.

Editor | Jiao Yang  Layout | Jiao Yang  Visuals | Zhang Zongwei