Everbright Futures 0629 Gold Review: Middle East Situation Reverses Again Over the Weekend, Gold May Remain Weak

Over the weekend, tensions between the U.S. and Iran resurfaced, with spot gold declining more than 1% during Monday’s early trading session. Last week, gold initially fell then rebounded; London spot gold dipped below the critical $4,000/oz support before bouncing back, recording a weekly drop of over 1%, marking a four-week decline streak. China's SHFE gold contracts saw a larger drop than international markets, with the main contract falling over 5% for the week.

Looking ahead to the second half of the year, the core pricing logic for the precious metals market will continue to be guided by the U.S. Federal Reserve's monetary policy path. The U.S.-Iran situation remains a significant variable and an important geopolitical indicator. In the baseline scenario, if the 60-day negotiations between the U.S. and Iran proceed smoothly and the Strait of Hormuz remains permanently open, the shift towards lower prices would alleviate inflationary pressure. This would likely revive expectations for Fed rate cuts and open up mid- to long-term upside potential for gold and silver as real interest rates are expected to decline. If the Fed’s rate cut materializes earlier, the probability of gold prices stabilizing would become more certain. However, uncertainties persist, especially if Waller continues to advocate for Fed independence and a strong dollar policy, causing the Fed to maintain hawkish expectations—this could trigger significant volatility in global financial markets, and tighter U.S. dollar liquidity would remain a headwind. From a price perspective, London spot gold has seen a year-to-date amplitude of 30%; historically, years with high amplitudes—apart from last year—have typically ranged from 30–35%, suggesting that the current downward cycle could be nearing its end. Reflecting on the first half of the year in June, gold faced multiple headwinds such as “bubble squeezing, geopolitical turmoil, rate hike expectations, and hawkish Waller.” With much of the negative news now priced in, market sentiment may improve in the second half. However, investors should note that trend opportunities will require a clear Fed policy pivot, which may necessitate more economic and inflation indicators as well as a longer observation period.

Written by: Li Qi

Professional Qualification: F3046227

Investment Advisory Qualification: Z0016145

Editor: Zhu Henan