The latest developments in the Middle East have become the market's primary focus. A series of attacks on vessels near the Strait of Hormuz included a drone strike on a massive Qatari liquefied natural gas (LNG) carrier. A Saudi-flagged supertanker was also reportedly affected. These incidents quickly intensified concerns over potential shipping disruptions and the stability of global energy supplies.

In response, the U.S. Central Command announced a series of retaliatory airstrikes against Iranian targets, hitting air defense systems, coastal surveillance facilities, missile sites, and port infrastructure in southern Iran. At the same time, Washington revoked its general license that had previously allowed Iran to sell oil on international markets. The move has placed significant pressure on the fragile ceasefire agreement reached last month.

The sharp rise in energy prices has not only heightened concerns over global supply chains but has also pushed inflation expectations higher, making oil prices an increasingly important macroeconomic factor influencing the pricing of financial assets, including gold. Recent market experience suggests that escalating geopolitical tensions have tended to weigh on gold indirectly through higher oil prices.

Despite rising oil prices, gold has failed to deliver the strong safe-haven rally typically associated with geopolitical uncertainty, underscoring the market's heightened sensitivity to Federal Reserve policy. Weaker-than-expected U.S. employment data last week briefly supported gold prices, with bullion climbing to a two-week high on Monday before reversing course. According to the CME FedWatch Tool, traders continue to price in roughly a 60% probability of a September rate hike, while expectations for further tightening in October also remain elevated.

The release of the Federal Reserve's June meeting minutes on Wednesday is expected to be a key market event. These will be the first meeting minutes from the Fed meeting chaired by Chairman Waller, and investors will be looking for fresh insights into policymakers' views on the economic outlook, inflation trends, and future policy guidance. The U.S. Treasury market has also reflected these concerns, with the 10-year Treasury yield climbing to a four-week high, while the 30-year yield also moved higher.

Although international gold prices have retreated, steady demand from China continues to provide important support for the gold market. The People's Bank of China reported that its gold reserves stood at 75.44 million ounces at the end of June, an increase of 480,000 ounces from the previous month, marking the 20th consecutive month of official gold purchases. This sustained accumulation highlights China's long-term strategic commitment as one of the world's largest gold buyers. Although the U.S. dollar value of its reserves has fluctuated with gold prices, its physical gold holdings continue to increase steadily.

Market Analysis:

On the 4-hour chart, gold remains in a corrective pullback, with the MACD lines and histogram converging around the zero line, indicating weakening momentum.

Going forward, gold's price direction will largely depend on the balance between escalating geopolitical tensions in the Middle East and expectations for Federal Reserve monetary policy. If tensions in the region continue to intensify, gold could face further near-term downside pressure as higher oil prices reinforce inflation concerns and support higher interest rate expectations. Conversely, if the ceasefire holds or diplomatic negotiations make meaningful progress, renewed safe-haven demand could help drive a rebound in gold prices.