Precious metals futures continued to consolidate during the week, with the macro front entering a critical verification window [SMM Precious Metals Macro Analysis]

[Bullish for precious metals]

Central bank gold purchases continue to accelerate, with official demand building a long-term floor

The central bank released its latest data showing gold reserves reached 76.73 million ounces as of end-August, up 650,000 ounces MoM (about 20.22 mt), marking the 22nd consecutive month of increases. The increment widened further from July, hitting a new monthly high since gold purchases resumed in November 2024, with the monthly purchase scale climbing steadily since March. Globally, World Gold Council data shows central banks made net gold purchases of 289 mt in Q2, up 62% YoY, the highest quarterly purchase volume in nearly four years. The accelerating pace of official-sector gold buying reinforces the logic of reserve diversification and sovereign credit hedging, providing structural support for gold prices and materially constraining downside room.

US dollar index weakened this week, with non-US currency tightening expectations providing indirect support

The US dollar index extended its weakness this week, falling about 0.8% cumulatively during the week and 1.02% for the month. The weaker dollar directly improves the global allocation appeal of dollar-denominated precious metals, attracting off-market buying interest. Meanwhile, expectations for Bank of Japan rate hikes continue to heat up, and sticky eurozone inflation supports the ECB's hawkish stance. Non-US currency tightening expectations are passively pressuring the dollar index, indirectly supporting precious metals.

US Treasury repeatedly intervenes in the Treasury market, with fiscal sustainability concerns intensifying sovereign credit hedging demand

The US Treasury announced it will expand the scale of long-term Treasury buyback operations to $6 billion, triple the normal level, and pledged that future regular operations will be no less than $4 billion. This is another escalation following the August 18 announcement that buyback scale would at least double, reflecting persistent liquidity pressure in the Treasury market and difficulty in absorbing long-end debt. Although the $6 billion scale sits at the low end of market expectations and briefly caused Treasury yields to rise rather than fall, in the medium and long term, the normalization of fiscal intervention and the intensifying trend toward debt monetization, combined with US public debt having surpassed $40 trillion, continue to weaken dollar credibility on fiscal sustainability concerns. Gold's value as a hedge allocation in non-sovereign credit assets is further reinforced, resonating bullishly with the materialization of debt risks.

Fed Governor Waller's dovish remarks cool September rate hike expectations at the margin

Fed Governor Waller sent a dovish signal, saying that if upcoming inflation data confirm inflationary pressures are cooling, he would lean toward supporting a rate hold at the September FOMC meeting. This stance stands in sharp contrast to Chair Walsh's hawkish Jackson Hole speech, driving market expectations for a September rate hike to pull back and giving precious metals a window of temporary relief.

[Bearish for precious metals]

August non-farm payrolls data far exceeded expectations, with economic resilience supporting the rate-hike narrative

US non-farm payrolls added 162,000 jobs in August, far surpassing market expectations of 55,000 and marking the second-highest monthly gain of the year; June-July data were revised up by a combined 55,000. The strong performance of the labor market stood in sharp contrast to July's disappointing non-farm payrolls, significantly easing market concerns about an economic recession and providing fundamental support for the Fed to maintain its hawkish stance and hike rates in September.

US Treasury yields continued to climb past 4.8%, with elevated real rates weighing on valuations in the near term

US Treasury yields kept rising this week, with the 10-year yield breaking through the key 4.8% level and reaching 4.857% on September 10, a new high since November 2023; the 30-year yield climbed to 5.307%, the highest since 2007. The persistently high real-rate environment continued to pressure valuations of non-yielding precious metals.

US-Iran conflict pushed energy prices higher, reinforcing expectations of Fed tightening

Military friction between the US and Iran persisted this week, with the market continuing to price in the risk of shipping disruptions in the Strait of Hormuz, and Brent crude holding above $100. The trading logic of this geopolitical event has shifted: high oil prices directly intensified upward pressure on US inflation, and the market is pricing in energy-driven inflation dragging on the pace of core inflation pullback, raising the probability of a Fed rate hike in September. The rising opportunity cost from higher rates outweighed traditional safe-haven buying, creating downward pressure on precious metals.

With the September FOMC meeting approaching, rising policy uncertainty weighed on risk appetite

As the Fed's September policy meeting draws near, the market remains deeply divided over whether a rate hike will occur in September. On August 28, Fed Chairman Warsh delivered hawkish remarks at the Jackson Hole symposium, stressing that inflation remains too high and that further rate hikes would continue if there is no confidence that inflation is moving toward target, creating an internal divergence with Waller's more dovish tone. Ahead of the meeting, wait-and-see sentiment prevailed, bulls proactively trimmed positions, precious metals volatility rose notably, and overall capital flows turned cautious.

[Macro summary]

The precious metals market showed a consolidation pattern this week, initially falling before rebounding. Early in the week, prices were pressured by the stronger-than-expected August non-farm payrolls data and climbing US Treasury yields, while mid-week gains were driven by a weaker US dollar. On the macro front, bullish and bearish factors were intertwined: fiscal sustainability concerns boosted sovereign credit hedging demand and a softer dollar provided support, but the stronger-than-expected non-farm payrolls data, the US-Iran conflict driving oil prices higher and reinforcing rate-hike expectations, policy uncertainty ahead of the September FOMC meeting, and wait-and-see sentiment before inflation data all exerted downward pressure. We will focus on the upcoming August CPI/PPI data, the US Fed meeting decision on September 15-16, and marginal changes in the US-Iran situation.