[Bearish Precious Metals]
US Fed Hawkish Officials Continue to Speak; High-Rate Stance Has Not Fundamentally Shifted
This week, Kansas City Fed President Schmid publicly stated over two consecutive days, emphasizing that current inflation remains elevated and the existing policy rate does not reflect sufficient tightening effect, and that he believes further rate hikes are needed to bring inflation back to the 2% target, highlighting that the hawkish camp within the US Fed still holds considerable sway. Although market expectations for rate hikes pulled back after the employment data weakened, the US Fed officially maintained its "data-dependent" stance, without releasing any policy pivot signals. The high interest rate range of 3.50%-3.75% will persist, and the suppression of high real interest rates on precious metals valuations has not been fundamentally removed.
Non-Farm Payrolls Window Sees Cautious Funds, Weak Ex-China ETF Inflow Growth
This week, the entire market focused on Friday's non-farm payrolls data. Ahead of the key data release, funds overall adopted a cautious wait-and-see approach. The holdings of the world's largest gold ETF, SPDR, moved sideways for several days at the beginning of the week, and only after the ADP data beat expectations did it record a single-day increase of 4.85 mt. The limited incremental inflows in the first half reflected that overseas institutions had not yet formed a consensus bullish view before a policy pivot was confirmed. Although China's gold ETFs continued to see net inflows, the insufficient combined force of funds at the global level limited the upside flexibility of precious metals to a certain extent.
US-Iran Situation Sees Repeated Games; Inflation and Rate Hike Risks Under Oil Price Support Remain Unresolved
This week, the geopolitical situation in the Middle East exhibited a pattern of back-and-forth games. The US unilaterally released peace-talk signals, claiming it would promote the resumption of navigation in the Strait of Hormuz, but Iranian officials explicitly denied any arrangement for direct negotiations between the two sides, stressing that they would not compromise on core interests. The root contradictions of the conflict have not been substantially resolved. Affected by the repeated news flow, international oil prices first fell and then stabilized. After dropping to around $80, Brent crude oil found support. Uncertainty over energy prices persists, the tail risk of a second round of inflation has not been fully released, and the underlying logic for the US Fed to maintain high rates and even further rate hikes has not been completely broken.
[Bullish Precious Metals]
ADP Employment Significantly Misses Expectations; Labor Market Cooling Catalyzes Reversal in Rate Hike Expectations
The US July ADP private-sector employment data, released on August 5, showed an increase of only 44,000 jobs, a new low for 2026 and far below the market expectation of 70,000. The June figure was also revised down to 95,000, indicating that the US labor market is cooling at a pace significantly faster than market expectations. After the data was released, the market's implied probability of a Fed rate hike in September plunged from 67% to around 55%. The 10-year US Treasury yield also fell sharply simultaneously, directly reducing the opportunity cost of holding precious metals. The previously suppressed bullish sentiment was concentratedly released, driving spot gold to surge over 4% in a single day and breaking through a new stage high of $4,300/oz. Meanwhile, the market broadly lowered expectations for the upcoming non-farm payrolls data. If the data further confirms the weakening employment trend, expectations for a US Fed policy pivot will intensify.
Expectations for US-Iran peace talks have been partly realized, and falling oil prices have eased inflation and rate-hike pressures.
This week, the US released intensive signals regarding US-Iran negotiations. Combined with mediation by Qatar and other countries, the market temporarily priced in the logic of easing Middle East geopolitical tensions. International oil prices saw a sharp correction, with Brent crude falling over 5% in a single day, rapidly pulling back from above $90 to around $80. The sharp decline in oil prices directly suppressed medium and long-term inflation expectations, breaking the previous negative transmission chain of “geopolitical conflict → rising oil prices → secondary inflation → US Fed rate hikes” and became an important marginal force driving the valuation repair of precious metals. Although Iran denied direct negotiations, the market pricing of marginal détente has been partly realized, providing short-term bullish support for precious metals.
The debt risk of US Treasuries has become increasingly apparent, and the pressure on US dollar credit has reinforced the logic for long-term allocation.
On August 2, the total US national debt officially broke through $40 trillion, and the Treasury’s net financing needs for Q3 reached $671 billion, with fiscal debt pressures continuing to mount. Meanwhile, after nearly 30 years, the US and Japan jointly intervened in the foreign exchange market to buy yen, the core purpose being to prevent Japan from selling US Treasuries to stabilize its exchange rate, which could trigger liquidity risks in the Treasury market, indirectly confirming the fragility of the US debt system. Affected by multiple factors, the US dollar index consolidated and pulled back this week, and expectations for a long-term weakening of the dollar heated up. Combined with the market’s growing consensus on a shift in the US Fed’s rate cycle in H2, gold’s long-term allocation value as a non-sovereign credit hedge asset continued to rise. The long-term trend of central bank gold purchases also provided bottom support for precious metals prices.
[Macro Summary]
This week, the precious metals market saw intense battles between bulls and bears, with the market undergoing wild swings, first declining and then rising. At the beginning of the week, gold prices were suppressed by hawkish official remarks and repeated geopolitical tensions, maintaining a sideways consolidation pattern. Mid-week, the ADP employment data significantly missing expectations became a turning point, and the rapid pullback in rate hike expectations drove gold prices sharply higher, hitting a near two-month high.
In the short term, the upcoming July non-farm payrolls data will be the core pricing anchor for the next phase, directly determining the extent of revisions to US Fed rate hike expectations, and will also guide the short-term direction of precious metals. From a medium and long-term perspective, the escalating US fiscal debt risks and the gradually heating up expectations of a rate cycle shift will continue to provide underlying support for precious metals. Going forward, close attention should be paid to the non-farm payrolls data, actual developments in US-Iran relations, and marginal changes in the US Fed’s policy stance.
