[Bearish Precious Metals]
Geopolitical conflicts push up oil prices; inflation trade replaces safe-haven logic and turns bearish
This week, the US-Iran situation escalated sharply (massive US strikes on Iran, Iran threatening to close the Strait of Hormuz). Crude oil surged in response, with WTI jumping above $74/barrel and Brent approaching $80. The oil price spike fueled inflation expectations, and market rate hike expectations rose, weighing on non-yielding precious metals. On July 8, COMEX gold fell 1.7% to $4,086.6, silver fell 4.3% to $58.69, and spot silver lost the $59 level.
The US Fed's June minutes leaned hawkish, rekindling rate hike expectations and pressuring valuations
The latest FOMC minutes showed that a few officials believed a June rate hike was warranted but ultimately supported no change, while most officials favored removing the "easing bias," leaving both rate hikes and cuts possible. The minutes reversed the rate-cut optimism that followed the earlier-week nonfarm payrolls miss, and the expectation of higher real rates directly pressured non-yielding assets, serving as the core driver for gold and silver's decline toward week's end.
The US dollar stayed elevated around 101, US Treasury yields rose, and institutional fund outflows compounded the pressure
The US dollar index remained firm around 101 throughout the week (slightly lower at week-end but still at 101.05), and the 10-year US Treasury yield rose from 4.49% to 4.77%. Meanwhile, global gold ETFs saw a net outflow of $8.9 billion in June, indicating clear short-term fund exits. Rising yields and a stronger dollar created a dual headwind, and the lack of fund inflows left rebounds lacking sustainability.
[Bullish Precious Metals]
The central bank has added gold for 20 consecutive months; official purchasing builds a long-term floor
At end-June, the central bank's gold reserves reached 75.44 million ounces (up 480,000 ounces MoM), marking the 20th consecutive monthly increase. Recently, the central bank conducted trillions of yuan in outright reverse repos, and its monetary policy committee meeting maintained a moderately accommodative stance. The ongoing official buying trend, combined with ample domestic liquidity, provided structural support to gold prices, limiting downside room.
Nonfarm payrolls miss weakens rate-hike expectations; dip buying validates valuation resilience
On July 3, the US June nonfarm payrolls increased by only 57,000 (expected 113,000), significantly weakening rate-hike expectations. The dollar fell below 101 to 100.87, and Treasury yields pulled back (10-year at 4.49%, 2-year at 4.18%). By July 6, gold had gained 1.18%, ending a four-week losing streak, and silver rose 2.28% to reclaim the $62 level. This indicated that once rate hike expectations receded and the dollar and yields declined, precious metals buying quickly returned, showcasing valuation recovery resilience.
Medium-to-long-term inflation hedge logic remains intact; H1 ETF net inflows still at $8 billion
Although ETFs saw short-term net outflows in June, H1 overall still had net inflows of $8 billion, and long-term allocation demand remained intact. The higher inflation floor resulting from oil price increases provides underlying support for precious metals' inflation-hedging properties in the medium to long term, creating a layered bullish/bearish dynamic over different time horizons with near-term rate hike expectations.
[Macro Summary]
On July 3, the US June nonfarm payrolls added only 57,000 jobs, far below expectations, as the job market released cooling signals. Combined with a weaker US dollar, market expectations for US Fed rate hikes pulled back marginally. Precious metals seized a technical rebound opportunity, and gold snapped its four-week losing streak. However, as trade entered July 8–9, the logic swiftly shifted. Escalating US-Iran tensions pushed up oil prices, and the hawkish Fed June meeting minutes compounded the pressure. Geopolitical risks and policy pressures resonated, sending the broader precious metals trend back into a downward trajectory under pressure. The next key observation window lies in the US June CPI and retail sales data, which will directly verify the sustainability of the inflation rebound and determine the extent of adjustments to rate hike expectations, becoming a critical variable for the near-term direction of precious metals.
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