ATFX: Gold breaks below the $4,000 mark, fading high inflation expectations are the trigger

ATFX: During the conflict between the US and Iran, gold fell instead of rising; after the conflict, gold led the decline. On March 2, the first trading day after the start of the US-Iran conflict, gold opened at $5,374; on June 17, after the US and Iran respectively completed the signing of the memorandum of understanding, gold closed at $4,257. During the entire Russia-Ukraine conflict period, gold cumulatively fell by $1,117, far exceeding market expectations.

Gold has safe-haven attributes, but when facing Middle Eastern issues, it falls instead of rising, meaning that the current gold price above $4,000 has severely overdrawn market confidence. After the US and Iran signed the memorandum, gold's decline rapidly expanded. Yesterday, gold fell sharply again, touching a low of $3,959, breaking through the $4,000 mark. On one hand, the fading of safe-haven sentiment impacted the gold price; on the other hand, the Fed's interest rate hike expectations did not cool significantly with the decline in international oil prices.

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The above is the Fed's June interest rate decision dot plot. Although Fed Chairman Warsh and Treasury Secretary Besant are not optimistic about the practical value of the dot plot, it is of extraordinary significance for interest rate guidance. For the 2026 interest rate expectation, 9 members support an interest rate above 3.75%, meaning at least one rate hike. The total number of voters is 18, with a relatively high proportion supporting a rate hike. For the 2027 interest rate expectation, 8 people support an interest rate above 3.75%, one less than in 2026, meaning the US rate hike action is only a temporary operation and not long-term. The center of gravity for interest rates in 2027 and 2028 has shifted downward significantly, meaning the future long-term trend favors loose monetary policy.

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The above is the bar line of the US core PCE price index annual rate. Starting from December 2025, the PCE annual rate has shown a rapid upward trend, driven by the conflict between the US and Iran in the Middle East. High crude oil prices not only pushed up consumers' energy usage costs but also indirectly increased the transportation costs of most consumer goods. Although the US and Iran signed a memorandum of understanding on June 17, the passage of commercial oil tankers through the Strait of Hormuz fell short of expectations. Although international oil prices have fallen below $70, the decline in US gasoline and diesel prices remains small. Donald Trump even used the US Department of Justice to conduct a pattern check on US diesel suppliers. This means that even if the US-Iran conflict ends, the US's potential high inflation problem will not quickly disappear. This is the core reason leading market participants to expect the Fed to raise interest rates once by the end of this year.

Gold has safe-haven attributes, but this attribute is weakened due to its high price. The US dollar index is likely to benefit from the Fed's rate hike expectations and may strengthen in the second half of this year. Gold has broken below the $4,000 integer mark, and market quotes have fallen significantly compared to the first half of this year, but this does not mean the timing for bottom-fishing has arrived. Neither the monetary policy level nor the safe-haven attribute level has given a reversal signal. At this stage, it is more appropriate to maintain a bearish view based on technical trend continuation.

ATFX Risk Warning, Disclaimer, Special Statement: The market has risks, and investment requires caution. The above content only represents the analyst's personal views and does not constitute any operational advice. Please do not regard this report as the only reference. In different periods, the analyst's views may change, and updated content will not be notified separately.