【TMGM Financial Recap】Fed's Hawkish Stance Suppresses Gold Prices, While A Drop In Oil Prices Triggers A Rebound. Bottom-Fishing And Waiting Find It A Dilemma!

On Monday, spot gold fluctuated downward, briefly breaking below the key support at 4335. The US dollar index continued its upward trend, driven by expectations of further monetary tightening by the Federal Reserve, becoming the core force suppressing gold prices. Meanwhile, geopolitical conflicts in the Middle East continue to ferment, with energy price fluctuations intertwining with inflation expectations, putting pressure on gold's appeal as a traditional safe-haven and inflation hedge in a high interest rate environment. Entering Tuesday, inflation concerns caused by falling oil prices eased, driving gold prices to rebound volatilely.

The long-standing negative correlation between gold and the dollar was once again fully reflected in this round of market activity. The US dollar index rose 0.2% on Monday, continuing last week's Fed rate hike gain of over 1% and reaching a high in over two months. The stronger dollar directly increased the cost for holders of other currencies to buy gold, thereby suppressing demand.

CME FedWatch tools show an 88% chance of a Fed rate hike in December, and a 55% chance of at least a 25 basis point hike at the October meeting.

More importantly, statements from several Fed officials have further reinforced hawkish expectations. Chicago Fed President Goolsbee said on Monday that the drivers of U.S. inflation may no longer be limited to tariffs and energy price shocks over the past 18 months; strong demand may now be pushing inflation higher, which may require the Fed to accelerate rate hikes. He specifically mentioned that the booming growth in AI investment may push prices higher on a larger scale, while persistently high inflation in the services sector means cost pressures are not solely from oil price shocks. If the main thread of inflation comes from overheated demand, interest rate responses will need to be more aggressive and require more front-end efforts.

The President of the St. Louis Fed also stated that the Fed may need further rate hikes to reduce inflation triggered by strong demand and price shocks that have already spread from oil to other commodities, emphasizing the best early action. Behind these remarks lies the Fed's reassessment of inflation persistence. The Personal Consumption Expenditures Price Index rose 3.7% year-on-year in July, but has shown little improvement recently, still clearly falling short of the 2% target. In a high interest rate environment, gold's relative appeal as a non-yielding asset naturally declines, with funds shifting more toward interest-bearing dollar assets, which has become the fundamental logic suppressing gold prices.

Meanwhile, the movements of the Yemeni Houthi forces continue to stir up the Middle East. The Houthis have expanded their offensive, attempting to cut off contact along the Red Sea coast with areas controlled by Saudi support forces, and have reportedly even attacked facilities related to Riyadh and Saudi Aramco.

Market Insight:

Currently, the gold market is caught in a dual game between policy tightening and geopolitical risks. The US dollar and interest rates are the dominant short-term factors, while persistent inflation and the situation in the Middle East constitute medium- to long-term variables. While investors closely monitor Federal Reserve officials' statements and key economic data, they need to closely monitor the synergy between oil prices and diplomatic developments.