- Spot gold slightly declined during Monday's trading session, mainly due to the dual pressures of a stronger dollar and rising international crude oil prices. Market funds tend to be cautious on the eve of key political decisions.
- Investors are currently closely monitoring U.S. President Donald Trump's final decision on whether to extend the ceasefire agreement proposal with Iran. Geopolitical uncertainty has intensified volatility in the commodity markets.
- Senior Federal Reserve (Fed) officials have warned about the potential inflationary impact of the Middle East conflict in the medium to long term and hinted that if core inflation pressures continue to rise, a more restrictive monetary policy mix may be needed in the future.
Geopolitical Uncertainty Suppresses Precious Metals Performance
As of today's session, spot gold fell by 0.3%, quoted at $4,521.25 per ounce. Meanwhile, U.S. gold futures for August delivery fell by 0.9% to $4,551.60 per ounce. The continued strengthening of the dollar index has directly increased the actual cost for non-U.S. currency holders to purchase gold, thereby exerting a visible suppression on dollar-denominated precious metal assets. Tim Waterer, Chief Market Analyst at KCM Trade, pointed out that the rebound in oil prices and the unresolved prospects of the U.S.-Iran agreement together constitute the core factors for the volatile fluctuations in gold prices at the beginning of this week.
Escalation of Middle East Conflict Triggers Concerns Over Oil Prices and Inflation
International crude oil prices surged by more than 2% in early Monday trading, mainly due to the further deterioration of the security situation in the Middle East. Israeli Prime Minister Benjamin Netanyahu previously stated that he had ordered the military to further penetrate into Lebanon to combat the Hezbollah armed group supported by Iran. The rapid rise in energy prices has directly triggered widespread concerns in the financial markets about the potential resurgence of global inflation, which has also altered the risk pricing logic across various assets in the short term.
Intensified Military Confrontation and Trump's Decision Window
On the political front, U.S. President Donald Trump previously stated that he would soon make a formal decision on the proposal to extend the ceasefire agreement with Iran. However, it appears that there are still significant differences in the positions of both parties on the core issues of the conflict. Over the weekend, the U.S. conducted targeted strikes on Iranian military targets, while the Iranian Revolutionary Guard claimed on Monday to have carried out a retaliatory attack on a U.S. military base. This direct military confrontation has made the prospects for extending the ceasefire agreement uncertain, with market risk aversion sentiment diverging between the dollar and gold.
Fed Officials Signal Extended Tightening Policy
Regarding the potential spillover effects of the Middle East geopolitical crisis on the macroeconomy, Fed Vice Chair for Supervision Michelle Bowman emphasized in a public statement that although the final impact of the geopolitical conflict on the economy is still being assessed, potential disruptions in the energy supply chain could lead to sustained inflation. Bowman noted that if the core inflation rate rebounds or remains at a high level, the Fed may need to adopt a more restrictive monetary policy mix. This statement has reinforced market expectations that a high-interest-rate environment will persist for a longer period, thereby exerting continuous marginal pressure on gold assets at the yield level.
