Spot gold extended the previous day's losses, falling to its lowest level since March 23. This latest decline was not an isolated event, but rather the inevitable result of a double squeeze from escalating geopolitical tensions and shifting expectations for US monetary policy. Although the renewed Middle East conflict once again captured market attention, gold — traditionally regarded as a safe-haven asset — continued to come under pressure, highlighting the market's extreme sensitivity to the future path of Federal Reserve policy.

The key catalyst behind the latest developments stemmed from direct military confrontation between the United States and Iran. US President Donald Trump publicly stated that Iran had shot down a US Apache helicopter conducting a patrol mission near the Strait of Hormuz. Although both pilots were successfully rescued by drones, the incident was considered highly serious. Trump subsequently vowed that the United States would respond, and US Central Command quickly carried out what it described as defensive strikes against multiple targets in southern Iran.

Although the Strait of Hormuz — one of the world's most important oil transportation routes — once again became the center of attention, and despite the Trump administration continuing to push for a peace agreement with Iran, the market did not treat the conflict as a major bullish catalyst for gold as it often has in the past. Instead, gold prices continued to decline following the news. One important reason was that Trump and other US officials repeatedly emphasized that the strikes were limited in scale and scope, designed to send a warning rather than signal a broader military escalation. This "controlled conflict" narrative weakened gold's traditional safe-haven appeal.

Beyond geopolitical factors, the primary force weighing on gold remains the US domestic macroeconomic backdrop. Following last Friday's stronger-than-expected US May employment report, market attention quickly shifted toward this week's key inflation data releases. The May Consumer Price Index (CPI), due on Wednesday, and the Producer Price Index (PPI), scheduled for Thursday, will serve as critical indicators for assessing the Federal Reserve's next policy move.

Investors currently estimate the probability of a Federal Reserve rate hike in December at approximately 74.2%. In a high-interest-rate environment, the opportunity cost of holding non-yielding assets such as gold increases significantly, directly pressuring gold prices. Overall, the gold market is currently caught between fading geopolitical uncertainty and expectations of tighter Federal Reserve policy. In the short term, if this week's US inflation data remains elevated, gold may continue facing downside risks and could test lower support levels. However, should the conflict show signs of easing beyond expectations, or if inflation data comes in weaker than anticipated and causes rate-hike expectations to retreat, gold could still stage a rapid rebound.

Market Analysis:

Gold declined again on the 4-hour chart, with both the MACD lines and histogram remaining below the zero line while showing signs of convergence. From a medium- to long-term perspective, global geopolitical uncertainty has not fundamentally disappeared. Shipping through the Strait of Hormuz remains far from fully restored, while ongoing central bank gold purchases and potential systemic risks will continue to provide solid support for gold prices.