[TMGM Financial Recap] Trump's Middle East Strategy Remains Deadlocked as Gold Trades Sideways, but a Breakout Is Only a Matter of Time

Spot gold briefly climbed toward US$4,082 on Monday before giving back its gains and trading lower. While the move appeared to be a modest pullback on the surface, it reflected an intense tug-of-war between recurring Middle East tensions, sharp swings in crude oil prices, renewed inflation concerns, and growing uncertainty over the Federal Reserve's policy path.

Gold has traded within a relatively narrow US$4,000-US$4,200 range for more than a month, with every geopolitical development testing both investor patience and the market's pricing logic. The latest rally and subsequent retreat were triggered after U.S. President Donald Trump unexpectedly called off plans for a large-scale strike against Iran over the weekend and announced that both sides would hold talks.

The initial announcement pushed gold higher at the start of Monday's session, as investors briefly interpreted it as a sign of de-escalation. However, Iran quickly denied the claim. An Iranian Foreign Ministry spokesperson stated that no negotiations with the United States were taking place, nor were any meetings planned. According to the spokesperson, all relevant officials remain in Iran, and the only ongoing discussions involve administrative matters with Oman regarding the management of the Strait of Hormuz.

Trump later responded on social media by accusing Iran of being "extremely hypocritical" and reiterated that the United States maintained full control over the Strait of Hormuz. He warned that nothing would pass through the strategic waterway unless an agreement was reached or Iran "fully surrendered."

These conflicting statements closely mirror the pattern seen over the past five months. Trump has repeatedly threatened military action before later softening his stance by citing diplomatic engagement, while Iran has consistently rejected direct negotiations with Washington since the collapse of the June memorandum of understanding. The result has been a recurring cycle of escalation followed by temporary easing, gradually eroding the effectiveness of safe-haven demand.

As a traditional safe-haven asset, gold has struggled to establish a sustained one-way rally in an environment dominated by conflicting headlines and rapidly changing narratives. Each temporary easing in geopolitical tensions encourages investors to rotate into risk assets, while every renewed escalation quickly restores support for gold. Increasingly, the market is treating Middle East tensions as a long-term background risk rather than an immediate catalyst capable of driving gold decisively higher.

Closely mirroring gold's movements, the oil market has also experienced significant volatility. If the conflict persists or evolves into a prolonged standoff, restrictions affecting the Strait of Hormuz and surrounding shipping routes are likely to continue supporting higher oil prices. As a result, inflation risks remain one of the strongest fundamental pillars supporting gold.

Gold has remained trapped between US$4,000 and US$4,200 for over a month as investors increasingly expect inflation to rebound, with July data likely to reverse much of June's moderation. Meanwhile, the U.S. July ISM Manufacturing PMI rose to 55.6, its highest level in more than four years. Both new orders and employment improved, yet supplier delivery times lengthened and the prices paid index remained elevated at 71.1, indicating that supply chain pressures and rising input costs have not fully subsided.

Market Insight:

This week, investors will closely watch the release of the ADP Employment Report and the U.S. Non-Farm Payrolls (NFP) report. Economists expect approximately 80,000 jobs to have been added in July.

These reports will play a critical role in shaping expectations for the Federal Reserve's next policy move. Stronger-than-expected employment figures could reinforce expectations for further rate hikes, placing short-term pressure on gold prices. Conversely, weaker labour market data could ease tightening concerns and provide gold with room to recover.