[Bearish for Precious Metals]
US-Iran conflict pushed oil prices to $90, inflation rebound reinforced rate hike logic
This week, events such as the complete halt of navigation through the Strait of Hormuz, the Houthis' maritime embargo on Saudi Arabia, and attacks on oil tankers in the Red Sea continued to disrupt the energy supply chain: WTI crude oil rose from $78.88/bbl to $86.90/bbl (intraday high $89), Brent crude breached the $90/bbl mark; the average US gasoline price exceeded $4/gallon again after a month. The surge in oil prices directly fueled inflation expectations. Cleveland Fed President Hammack hinted at the need for rate hikes, and the market priced the probability of a September rate hike at around 65%. The “oil → inflation → rate hike” transmission chain remained in play, serving as the core macro variable that suppressed precious metal valuations throughout the week.
Expectations of economic data recovery heated up, rate hike expectations suppressed precious metals rebound
Despite a larger-than-expected cooling in the US June CPI, continued oil price gains pushed up inflation expectations, and the market simultaneously raised its expectations for July CPI recovery. Meanwhile, initial jobless claims came in at 208,000, the lowest since May, confirming that labour market resilience remains intact and further weakening the case for rate cuts. Warming economic data expectations and job market resilience reinforced each other, providing fundamental support for the Fed to keep rates high or even resume hikes, leaving precious metals without a basis for sustained upside from a policy expectation perspective.
Dual pressure from USD and Treasuries coupled with equity market liquidity squeeze, funds struggled to flow into silver
The US dollar index held up well in the 100.7-101.2 range for the whole week, while the 10-year US Treasury yield moved higher in tandem, continuously raising the carrying cost of precious metals. At the same time, sharp declines in global equities triggered a liquidity squeeze, as institutions prioritised the reduction of high-liquidity assets to meet margin calls, making it difficult for funds to flow into silver and other precious metals. Geopolitical and tariff policy uncertainties further amplified market volatility. Precious metals faced pressure on both the funding and cost sides, limiting the scope for rebounds.
[Bullish for Precious Metals]
Geopolitical safe-haven buying returned strongly, gold rebounded from below 4,000 to back above 4,130
After gold breached the 4,000 level on 17 July (spot gold at 3,976.42), the US-Iran conflict sharply escalated from 20 July—Iran stopped implementing the memorandum of understanding, transit through the Strait of Hormuz halted entirely, Trump threatened severe strikes on nuclear facilities, Houthis attacked Saudi oil tankers, and Iran threatened to cut off all oil flows from the Gulf. Safe-haven buying erupted repeatedly, pushing spot gold back to $4,129.99/oz on 23 July (intraday high 4,160), with two consecutive days of sharp gains, allowing safe-haven logic to temporarily override the bearish impact of the oil-rate hike linkage.
Trump's tariff hikes sparked escalating global trade frictions, boosting safe-haven sentiment
This week, Trump previewed new tariffs on dozens of countries as soon as possible, sharply raising global trade friction expectations; policy uncertainty and the tariff shock fueled risk aversion, driving funds to seek non-sovereign credit assets such as gold to hedge both geopolitical and trade uncertainties. The safe-haven demand from trade frictions and geopolitical tensions resonated, providing periodic buying support for precious metals.
Central banks' continued gold purchases build a long-term floor, a potential faster BoJ rate hike offers indirect support
Central bank gold purchases remain on trend, providing structural support for gold prices and physically limiting downside room. On 23 July, a new variable emerged—a weaker yen intensifying inflation risks, with the Bank of Japan open to a faster rate hike pace. Expectations of non-USD monetary tightening could put passive pressure on the dollar, indirectly benefiting precious metals.
[Macro Summary]
This week, macro factors were mixed with no clear directional signal. On one hand, Middle East conflict pushed oil to $90, and the inflation-rate hike link continued to pressure precious metals; on the other hand, the return of geopolitical safe-haven buying, escalating trade frictions, and central bank gold purchases provided support. The US dollar and Treasury yields stayed high, overall fund flows remained cautious, and precious metals mainly consolidated in the short term, with no trend move emerging yet.
