Repeated Inflation And Geopolitical Conflicts Intertwine, The Countdown To The Federal Reserve's Rate Meeting Is Underway, And Gold Prices Will Set Their Trend This Week!
The latest U.S. inflation data has reinforced expectations for a Fed rate hike this week, while ongoing Middle Eastern conflicts have pushed oil prices higher, further intensifying uncertainty about interest rate outlooks. Entering this week, investors are closely watching the upcoming Federal Reserve policy meeting and whether gold has formed a technical bottom after a short-term pullback.
On Monday, spot gold rebounded slightly, and last Thursday, drones launched from Iraq attacked Saudi Arabia's east-west oil pipeline, forcing the Saudi government to shut down this vital crude oil transport artery. Riyadh has not disclosed the extent of the pipeline damage or the expected duration of the shutdown. The Iran-Gulf Arab States diplomatic meeting originally scheduled for Monday in Oman was suddenly postponed after the pipeline was attacked. The meeting was originally intended to discuss the situation in the Strait of Hormuz and temporary shipping arrangements. International oil prices opened more than 2% higher, further intensifying inflation concerns and putting pressure on gold prices.
The U.S. August Consumer Price Index (CPI) released last Friday showed prices rose 0.4% month-on-month, far above July's 0.1%, and the year-on-year increase remained flat at 3.4%. Core CPI, which excludes food and energy, rose 0.3% month-on-month, the largest increase in four months and exceeding the market's previous expectation of two consecutive months of 0.2%. CME FedWatch tool shows that investors' probability of a 25 basis point Fed rate hike this week has surged from about 67% before the data release to around 87%. Most analysts believe that accelerating inflation combined with signs of stabilization in previous employment data not only increases the likelihood of a rate hike this week but may also lay the groundwork for further tightening in October or December.
Gold is rebounding rapidly after a brief pullback, as CPI data further reinforces expectations of rate hikes, and the market has priced in a higher probability of price increases, reducing volatility. Current price trends show that after a recent pullback, gold is forming a short-term bottom. Although inflation itself remains the traditional factor supporting gold, in the current environment, the strengthening of Fed rate hike expectations has a more direct pressure on gold prices. Oil prices remain above $100 per barrel, and diesel prices have hit record highs, further heightening concerns that inflation is spreading to broader sectors and making the market more determined to price in rate hikes.
A higher interest rate environment directly increases the opportunity cost of holding gold, thereby putting downward pressure on gold prices. Conversely, if the situation in the Middle East eases significantly, a drop in oil prices will ease inflation concerns and reduce expectations of rate hikes, making it easier for gold to gain upside potential.
Market Insight:
This week, market attention has shifted to the Federal Reserve's policy meeting. Investors have almost already viewed a rate hike as highly likely, but the more critical question is whether this rate hike will be a one-time event or the start of a new tightening cycle. If the Fed implements a rate hike this week, but the Middle East situation also escalates and pushes oil prices higher, rate hike expectations may further strengthen, putting greater downward pressure on gold prices; If the situation eases and oil prices fall, it will help ease interest rate concerns and support gold prices higher.
