After the publication of US inflation data on Wednesday, the precious metal attempted a brief bounce, but it was quickly negated. At one point, the price fell below the psychologically significant level of 4200.00, updating the lows not seen since March 24 to near 4130.00.
Investors, holding their breath in anticipation of the key Consumer Price Index (CPI) report, received data that generally aligned with forecasts. However, hopes for a sustainable recovery were dashed: the hawkish tilt of the Federal Reserve's monetary policy and renewed escalation in the Middle East continue to exert crushing pressure on the non-yielding asset.
Fundamental Background: "Hawkish Shock" and Geopolitics
1. CPI Data: Forecast Alignment Did Not Bring Relief
The main event on Wednesday was the publication of the US inflation data for May. The US Bureau of Labor Statistics (BLS) reported that the annual Consumer Price Index (CPI) rose to 4.2% from 3.8% in April, matching market forecasts and marking the highest level since May 2023. Month-over-month, the CPI increased by 0.5%, also in line with expectations.
Core CPI, excluding volatile food and energy prices, showed a less aggressive trend: month-over-month growth was 0.2% (forecasted at 0.3%), while year-over-year it stood at 2.9% (forecasted at 2.9%). This slight "underperformance" in the monthly core figure caused short-term optimism in the market: the US dollar weakened, and gold received a temporary reprieve, bouncing back from its lows.
However, this bounce proved to be short-lived. Investors remain convinced that inflationary pressures are unlikely to sustainably ease until the crisis between the US and Iran is resolved and oil prices return to pre-war levels.
2. The Fed: Probability of Rate Hike Increases
Despite the CPI data aligning with forecasts, it did not fundamentally change market expectations regarding the Fed's monetary policy. According to the CME FedWatch tool, traders assess the probability of at least one interest rate hike by the end of the year at around 70%.
This is a significant increase compared to 50% reported prior to last week's strong employment report (NFP).
The yield on 10-year US Treasury bonds has settled above 4.50%, making the US dollar extremely attractive in yield terms relative to gold. High interest rates increase the opportunity cost of holding gold, which pays no coupon income, while simultaneously supporting the dollar and making commodities more expensive for holders of other currencies.
3. Geopolitics: Escalation in the Persian Gulf
Contrary to expectations, the resumption of hostilities in the Middle East did not provide support for gold. Earlier in the week, the US carried out retaliatory strikes against Iran after President Donald Trump accused Tehran of downing an American Apache helicopter in the Strait of Hormuz. In response, the Iranian Revolutionary Guard Corps (IRGC) struck US military bases in Jordan, Kuwait, and Bahrain.
This paradoxical behavior can be explained by the fact that the geopolitical crisis, rather than directly increasing demand for safe-haven assets, works through the "oil channel." Rising oil prices heighten inflationary expectations, which in turn drive central banks to tighten policy, making this the primary bearish factor for gold. WTI oil prices, although corrected below $90 per barrel, remain significantly above pre-war levels.
Summary Table of Fundamental Factors
| Factor | Impact on XAU/USD | Comment |
|---|
CPI Data (4.2% YoY, in line with forecast) | Short-term support? Renewed pressure | Core CPI was softer (0.2% MoM), but the overall trend remains hawkish |
Probability of Fed Rate Hike (70%) | Pressure | Highest level since the beginning of the year, increases opportunity costs |
Increase in 10-Year Treasury Yields (4.50%+) | Pressure | Makes the dollar more attractive, gold less so |
US-Iran Escalation (exchange of strikes) | Pressure (through inflation) | Rising oil prices enhance hawkish Fed expectations |
Strong NFP Data (172K) | Pressure | Confirmed the hawkish shift in Fed policy |
Central Banks (reserve purchases) | Support (structural) | China, India, and others continue to buy gold, but this factor is currently overshadowed |
Key Events of the Week
| Date | Event | Forecast/Expectation | Expected Impact on XAU/USD |
|---|
Wednesday, June 10 (12:30 GMT) | US CPI Data (May) | Actual: 4.2% YoY, 0.2% MoM (core) | Bounce was short-lived. Hawkish tilt persists |
Thursday, June 11 (12:30 GMT) | US PPI Data (Producer Price Index) | — | Secondary inflation indicator |
Thursday, June 11 (12:15 GMT) | ECB Rate Decision and Lagarde's Press Conference | Rate hike expected to 2.40% | Impact on US dollar via cross-rates |
Throughout the Week | Statements from US, Iran, Israel Leaders | — | Any escalation = rising oil prices = pressure on gold (through Fed) |
June 16-17 | FOMC Meeting | First meeting under new Chairman Kevin Warsh | Potential turning point |
Conclusion
Gold is under intense pressure from a combination of hawkish factors, and the short-term bounce following the CPI data did not change this picture. Strong US labor market data (NFP) and the subsequent reevaluation of Fed rate expectations (probability of a hike—70%) dealt a crushing blow to the non-yielding asset.
The technical breakdown below the 200-day moving average (4380.00) after 640 trading days above it confirmed a trend change. Gold is no longer trading in a "buy on dips" mode that has dominated the market for the past two years.
Nevertheless, structural bullish drivers (central bank purchases, currency devaluation, geopolitical fragmentation) remain in place. Economists maintain that the upward trend is merely postponed, not canceled. However, for it to resume, moderation in inflation driven by rising energy prices is necessary.
Investors should exercise extreme caution. The PPI data on Thursday and the FOMC meeting on June 16-17 will be the next determining macroeconomic tests.
