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<p>Over the past week, gold has extended its losses, breaking below the key psychological support level at $3,300. Optimism around tariff agreements and a powerful rally in U.S. equities have significantly diminished gold&rsquo;s appeal. That said, rising market expectations for a July rate cut, growing concerns over the Fed&rsquo;s policy independence, and a weaker U.S. dollar continue to offer a supportive backdrop.</p>
<p>Looking ahead, in addition to ongoing trade negotiations, investors should closely watch this week&rsquo;s U.S. jobs data and the Sintra forum, both of which could offer clearer guidance on the Fed&rsquo;s rate path - and potentially shift gold market dynamics.</p>
<h2>Breaking Key Support: Technical Warning Signs Emerge</h2>
<p>Turning to the XAUUSD daily chart, gold has extended its retreat from mid-June. With bearish momentum building, prices last Friday closed below the 50-day moving average for the first time since January&mdash;breaking a key area of technical support. The $3,300 level failed to hold, with the metal finishing the day below it. As of Monday&rsquo;s early trading, gold was hovering around $3,270.</p>

XAUUSD_2025-06-30_14-23-44.png

<p>Should bearish pressure persist, support might emerge near the $3,170 range lows seen in mid-April. Conversely, if bulls regain control and manage to reclaim $3,300 and the 50-day MA, that could mark the start of a recovery.</p>
<h2>TACO Returns and Stock Rally: Multiple Headwinds Weigh on Gold Prices</h2>
<p>While the rapid de-escalation of geopolitical tensions in the Middle East was the spark for this leg lower, what’s really driving the sustained downtrend is a combination of easing trade friction and surging equity markets – both are undermining demand for safe-haven assets like gold.</p>
<p>On the trade front, the TACO appears to have worked once again. Last week, Bessent called removal for retaliatory tariffs under Section 899, only to later say on Friday that a deal might be reached before Labor Day (Sept. 1) - making the July 9 tariff pause deadline more of a formality. Both the U.S. and EU have expressed confidence in reaching a deal before the deadline, even though talks between the U.S. and Canada have hit a snag over digital services tax issues. Overall, the improving tone on trade is easing market anxiety and weighing on gold.</p>
<p>The rebound in sentiment has also spilled over into equities. The Nasdaq and S&amp;P 500 have now posted gains for seven straight days, with both indices refreshing record highs. Similar momentum has been seen in the Nikkei and Germany’s DAX 40. Investors appear to be shifting from defensive selling to FOMO, further dimming gold’s appeal.</p>
<h2>Fed Turns More Dovish: Rate Expectations Become Key for Gold</h2>
<p>Still, gold isn’t out of the game. There’s another side to the coin. Several Fed officials -including Bowman and Waller - have adopted a more dovish tone recently. While May’s core PCE inflation came in at 2.7% YoY (slightly above expectations), the three-month annualized rate dropped sharply to just 1.7%, reinforcing expectations for rate cuts later this year. The market-implied probability of a July cut rose from 13% to 18% following the data. The increased likelihood of lower rates is a tailwind for gold, which offers no yield.</p>

Screenshot 2025-06-30 at 2.31.47 PM.png

<p>Another factor supporting gold is growing concern about the Fed&rsquo;s independence. The White House has been attempting to exert influence over monetary policy, with Trump threatening to nominate Powell&rsquo;s successor before October. If a &ldquo;shadow chair&rdquo; is appointed early and begins to steer policy before Powell&rsquo;s term officially ends, it could seriously undermine confidence in U.S. monetary policy. Such a scenario would boost safe-haven demand and further accelerate the global trend of de-dollarization - both positive for gold.</p>
<p>Add to that a softer dollar and falling real yields, and the opportunity cost of holding gold drops even further. Meanwhile, central banks continue to accumulate gold reserves, helping form a firm price floor.</p>

US10Y-T10YIE_2025-06-30_14-33-11.png

<p>In short, gold is under pressure and currently testing key technical support levels. The fading of tariff tensions and booming equity markets have drained safe-haven flows, but Fed&rsquo;s dovish tone, trade friction, and dollar weakness are still helping to underpin prices. I&rsquo;m personally leaning toward buying the dip for now - but if prices break below $3,280, I&rsquo;ll reconsider.</p>
<h2>Nonfarm Payrolls Key Variable; Sintra Forum May Spark Volatility</h2>
<p>For the rest of the week, Friday&rsquo;s nonfarm payrolls report will be the most important. The market expects an increase of 110,000 jobs, well below last month&rsquo;s 139,000, and a slight uptick in the unemployment rate to 4.3%.</p>

Screenshot 2025-06-30 at 2.34.21 PM.png

<p>Given that the Fed is actively evaluating when to begin cutting rates, markets may be more sensitive to downside surprises than upside ones. If the headline figure falls below 100,000 and the unemployment rate ticks up to 4.4%, the July FOMC meeting is more likely to be a &ldquo;live&rdquo; one or at least paving the way for a September cut.</p>
<p>Also worth watching is the Sintra forum, running Monday through Wednesday. ECB&rsquo;s Lagarde, Fed Chair Powell, alongside three other major central bank governors, will be speaking. Their views on inflation risks, slowing growth, and tariffs - plus their signals on rate paths - could all trigger further volatility in gold.</p>
<p>As gold market volatility heats up and key events unfold, seize the moment with <a href="/go/gold-2024/">Pepperstone&rsquo;s gold CFDs</a> - now offering spreads reduced by up to 30% to explore market opportunities.</p>

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Gold Outlook: Bears in Control, but Don’t Count Bulls Out Yet

<p>Over the past few trading days, the Hang Seng Index has shown strong bullish momentum, fully recovered the mid-June losses and actively testing the local high of 24,300 points from June 11, reflecting steadily improving market sentiment.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt86e399a8b9ce2fcf/685df88ab886d69900b3ae16/image.png" style="text-align: center;" /></div></figure><p>This rebound is partly fueled by easing geopolitical tensions in the Middle East and a global risk-on sentiment recovery. Meanwhile, the US tariff suspension is nearing expiration with little progress in negotiations. Trump’s recent comments on the Fed raised concerns about its independence, while dovish signals within the FOMC have increased market expectations for rate cuts. Together, these factors have weakened the US dollar, providing additional support for Hong Kong stocks priced in HKD.</p><p>While these macro drivers have some influence, they tend to be short-term or spillover effects insufficient to sustain the Hang Seng’s upward trajectory. More important for investors is identifying the factors that could provide longer-lasting momentum for Hong Kong equities.</p><p>Beyond the rise of new consumption (Labubu deserves a dedicated article), I believe the resurgence of the AI narrative and China-Hong Kong’s policies on digital currency and stablecoin reform will be the two main themes driving the Hang Seng’s mid-term performance.</p><h2>AI Reignites with China’s Cost-Effective Solutions</h2><p>As market risk appetite returns, the Nasdaq recently hit new highs. Nvidia rose over 4% this week, AMD surged nearly 14%, and tech giants like Amazon, Meta, and Microsoft followed suit.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img asset_uid="bltc7c6a48885b9c4ae" alt="AI with Chips background" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/bltc7c6a48885b9c4ae/67e21821c1f8ecd9add8c9a5/AI_with_Chips_bg_Featured_Image-min.png" style="text-align: center;" /></div></figure><p>Yet as traders revive bullish bets on AI, questions resurface: Are US tech valuations too high? Is it still wise to chase the rally? Against this backdrop, Chinese tech stocks, offering better valuations and improving fundamentals, are gaining renewed global investor attention.</p><p>China’s AI sector developments reinforce this logic. Since the DeepSeek R1 model attracted attention, a “low-power, high-efficiency” domestic AI path has taken shape. Despite US GPU export controls, China’s AI progress continues with an improving domestic chip ecosystem—Huawei Ascend, Baidu Kunlun, Alibaba Hanguang all lowering training costs and boosting deployment efficiency.</p><p>On this foundation, Chinese AI companies are rapidly iterating. After DeepSeek R1, Minimax’s M1 model further enhanced inference performance, emerging as a dark horse. Zhipu, preparing for a Hong Kong IPO in April 2025, pursues a “tech export plus local private deployment” strategy across emerging markets and is seen as a potential OpenAI competitor. These firms leverage open-source communities, domestic chips, and engineering prowess to build “China solutions” tailored to local scenarios.</p><p>Alongside these newcomers, industry giants Tencent, Alibaba, Baidu, and ByteDance are accelerating AI asset integration and commercialization. China’s AI development now forms a full ecosystem—from foundational model research, compute infrastructure, toolchain construction to industry application.</p><p>Supporting this ecosystem is massive infrastructure and policy investment. China has built the world’s largest 5G network; intelligent computing capacity now accounts for 35%. Estimates suggest annual AI-related capital expenditure has reached RMB 400 billion. By 2035, AI data centers could consume 10% of national power, achieving full green energy adoption—providing physical backing for large model training and building lasting competitive barriers.</p><p>This evolving AI ecosystem fundamentally supports the investment logic for Hong Kong stocks. On one hand, Hong Kong tech stocks still have valuation repair potential, offering “low valuation, high leverage” opportunities. On the other, accelerating AI deployment in China boosts corporate fundamentals and invites global investors to reassess China’s role and pricing power in the global AI value chain.</p><h2>RMB Internationalization Accelerates with Hong Kong as a Frontline Pilot</h2><p>Beyond AI, last week’s Lujiazui Forum delivered important signals on digital RMB and RMB internationalization. Authorities proposed establishing a digital RMB international operation center, piloting offshore RMB bond issuance, launching RMB FX futures, and accelerating RMB going global to enhance pricing power.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img asset_uid="blt5b0dae1f1520737a" alt="trading china-min.jpg" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt5b0dae1f1520737a/67d2db2d6ab315aec013d718/trading_china-min.jpg" style="text-align: center;" /></div></figure><p>The digital RMB itself bears no interest or fees, employs a “two-tier” system between central and commercial banks, ensuring state credit and improving payment efficiency. Unlike stablecoins issued by companies backed by assets and external regulation, digital RMB digitizes cash directly, enjoys legal tender status, and carries lower credit risk.</p><p>Currently, most cross-border clearing depends on SWIFT and CHIPS, unable to circumvent the US dollar system. China aims to build alternative channels via digital RMB and CIPS, with the core goal of reducing dollar reliance and enabling faster, cheaper, and more controllable RMB cross-border flows.</p><p>Notably, the pilot follows a “dual-track” approach: Mainland advances digital RMB, Hong Kong explores stablecoin regulation. This secures the main channel while creating a “testing ground” for innovation on payment efficiency, data supervision, and financial compliance, aiming to boost RMB influence.</p><p>Alongside digital RMB, other tools progress in tandem. The free trade zone’s “onshore-offshore bonds” simplify issuance, enhancing liquidity and operational flexibility. RMB FX futures offer mature hedging tools and pricing references for cross-border projects.</p><p>Though seemingly disparate, these moves form part of China’s broader effort to reshape its external financial system, accelerating implementation. For Hong Kong stocks, two impacts stand out:</p><p>First, Hong Kong as a frontline of RMB internationalization stands to benefit first from digital currency pilots, clearing system upgrades, and stablecoin oversight. Related sectors like fintech, banking, and trading platforms could directly gain from policy dividends.</p><p>Second, improved RMB cross-border channels will increase RMB asset accessibility and hedging capability, enhancing Hong Kong’s appeal in global asset allocation—especially for long-term capital seeking low-entry access to China’s market. Hong Kong is becoming the ideal gateway.</p><h2>Is now the time to jump into the Hang Seng?</h2><p>While AI and RMB internationalization offer solid mid-term tailwinds, the Hang Seng currently faces clear resistance around 24,300 points, with divided views on whether positive changes suffice to sustain gains. I remain cautiously bullish on Hong Kong stocks mid-term, but breaking key technical levels or challenging all-time highs will require more concrete catalysts.</p><p>Externally, US-China talks have shown goodwill but lack breakthroughs on critical areas like rare earths and chips. The market expects the White House to postpone the July 9 tariff decision to allow more negotiation time. Though China’s tariff exemptions last until August, the US’s broader trade stance hints at a more cautious policy tone, potentially recreating “TACO-style” trading patterns.</p><p>For Hong Kong stocks, short-term trade uncertainties persist. However, if tariff extensions materialize alongside softening US labor markets and easing inflation, rate cut expectations could rise, lifting risk appetite. Export-oriented firms await clearer policy signals, while Chinese tech and digital economy sectors—with valuation advantages and policy support—may lead the rebound. Current low valuations amid fragile confidence and fast theme rotation mean marginal improvements could have amplified effects.</p><p>On the domestic front, IPO and financing policies merit attention. In early June, regulators endorsed Guangdong-Hong Kong-Macau Greater Bay Area “dual listings,” allowing companies listed on the HKEX to apply for simultaneous listing on the Shenzhen exchange. This policy could unlock two-way capital flows and broaden funding channels beyond Hong Kong, attracting more mainland investors to quality tech firms.</p><p>Additionally, AI unicorn MiniMax is reportedly preparing for a Hong Kong IPO. Though early-stage, discussions on valuation and fundraising are underway. If successful, MiniMax could become the largest AI tech IPO in Hong Kong, materially boosting the sector’s valuation anchor and market interest.</p><p>In summary, rapid AI advancements and accelerating RMB internationalization are the two core forces driving the Hang Seng’s mid-term recovery. Despite short-term trade risks, China’s domestic AI solutions inject lasting confidence into the tech sector, while RMB cross-border payment and financial innovation further strengthen the investment case for Hong Kong stocks.</p><p>Starting in July, <a href="{SCA_BASE_URL}/register?legalEntity=individual&locale=en" target="_self">Pepperstone will add 26 selected Hong Kong stocks</a> spanning technology, new consumption, and banking sectors—helping you ride the Hang Seng’s rally and seize the best entry opportunities.</p>

trading china-min.jpg

AI Renaissance RMB Expansion: The Dual Forces Driving Hang Seng’s Rally

<p>The RBA will consider how this monthly inflation rate plays into the more important Q2 CPI release (due on 30 July). However, given the July RBA meeting takes place on 8 July, and sometime before the RBA receives the Q2 CPI data, the RBA must decide if the May CPI data provides them the sufficient confidence to lower the cash rate by 25bp to 3.6% at the upcoming meeting.</p><h3><strong>Reconciling the Aussie May CPI data to the SoMP forecasts</strong></h3><p>In the May Statement on Monetary Policy, the RBA forecasted headline CPI for the June quarter to come in at 2.1% and trimmed mean CPI at 2.6% - so, while the RBA put less weight on the monthly inflation figures, today’s data would sit well with the bank and would almost certainly give them the scope to ease again in the July meeting.</p><h3><strong>Market pricing for RBA policy</strong></h3><p>In response to the CPI data, the Aussie interest rate swaps market has moved to price 24bp of implied rate cuts for the July meeting - essentially ascribing a 97% probability for the RBA to lower the cash rate.</p><p></p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img alt="Market pricing for RBA policy " src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/bltdcf01c988f6cf233/685b809d23679e4867ece2d1/image_(11).png" style="text-align: center;" /></div></figure><p>With no major economic data set to impact ahead of the July meeting, a 25bp cut is seen as a done deal in the market’s eyes and with no scheduled speeches from RBA officials leading into the meeting, unless we see the RBA choose to guide market expectations lower – perhaps through an opinion piece in the AFR or WSJ – one can assume a cut is firmly on the cards.</p><p>Further out the rates curve, we see 82bp of implied cuts priced by December – this assumes a base case for a 25bp cut in July, August, and November. In fact, the market is toying with the idea that the RBA could even cut four times this year, possibly squeezing another cut in at either the September or December RBA meetings.</p><h3><strong>How low can the RBA cash rate go?</strong></h3><p>What is interesting is that the ‘terminal’ pricing, or the implied trough point for where the RBA could take the cash rate is currently implied at 2.90% - this implies four 25bp rate cuts in the entirety of the easing cycle. This assumed low point of 2.9% is also 30bp (or 0.3%) below the RBA’s own estimate for where the neutral rate is currently estimated to be (at 3.2%). The ‘neutral rate’ being the perceived rate setting which is neither stimulatory nor restrictive and falls in perfect equilibrium with the inflation and growth dynamic.</p><p></p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img alt="How low can the RBA cash rate go?" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt65565ddf47cb1746/685b80bef348c27c01055829/image_(12).png" style="text-align: center;" /></div></figure><p>While the interest rates markets have a history of overshooting the eventual reality, one questions if this implied forward policy setting – one that is somewhat stimulatory – suggests the market is sensing an increased risk of recession 12 months out.</p><p>I would argue that to be the case and while this implied pricing does not suggest a collapse in economic activity, if this implied low point in swaps pricing is taken to say 2.5%, I would argue this would be a powerful signal that all is not well in the domestic economy, with the market making a statement that the RBA need to go harder on stimulating demand through the rates channel.</p><h3><strong>The connection to Aussie markets</strong></h3><ul><li>What does this mean for the ASX200 banks, who will see their net interest margins (NIM) negatively impacted by the lower lending rates? A reduced lending rate would naturally lower NIM, although, in recent weeks the banks have been cutting term deposits more aggressively - so this will offset the effects from a lower cost of borrowing for households and businesses, and force savers further out of the risk curve.</li><li>What does this mean for REITS, consumer plays and other interest-rate-sensitive stocks?</li><li>What does this mean for house prices, which have already responded positively in recent months?</li><li>What does this mean for the high dividend, high yield equity plays?</li><li>What does the more aggressive rates pricing mean for the AUD? Are the cuts now sufficiently discounted that when they are realised it won’t move the dial on the AUD? Or will this dynamic see the AUD underperform, especially vs the AUD cross rates: AUDNZD, EURAUD, GBPAUD etc…</li></ul><h3><strong>Bring on the July RBA meeting</strong></h3><p>We look to the July RBA meeting – a cut at this stage is seen as a done deal - but having already cut the cash rate twice, the market is currently implying the RBA front load further cuts, as opposed to taking a more measured stance. We know the RBA were slower than other central banks to start the easing cycle, but the more aggressive the perceived pace of cuts, the greater the prospect of higher volatility in the market sensitive to a lower cash rate.</p><p>Good luck to all.</p>

RBA_meeting_preview_–_a_roadmap_for_future_hikes.png

The outlook for Australian Interest rates: The RBA set for a highly active 2H25

<p>Gold experienced a turbulent week, marked by a sharp rally followed by an equally swift reversal. Prices briefly surged above $3,450 amid intensifying tensions in the Middle East, before retreating as safe-haven demand quickly cooled.</p><p>Although the U.S. military formally intervened in the Middle East conflict last Sunday by striking Iran’s nuclear facilities, gold failed to sustain its upward momentum following a gap higher at Monday’s open. More notably, there were limited panic-driven safe-haven inflows. This reflects a cautious tone in the market, with traders appearing to take a wait-and-see approach to the evolving news flow.</p><p>While geopolitical risk remains a key focus, investors cannot ignore a range of more traditional macroeconomic drivers—particularly U.S. growth prospects, fiscal sustainability, and ongoing developments in trade and tariffs.</p><h2>Technical Picture: Market Struggles to Break Key Resistance</h2><p>On the daily XAUUSD chart, bears dominated the market last week. After briefly breaking above the key resistance level at $3,430 on Monday, gold failed to stage a meaningful breakout, with the battle between bulls and bears quickly shifting back to the $3,380 region.</p><p>Prices then edged lower in a steady decline throughout the week. However, toward the end of the week, intensified two-way flows pointed to a fierce tug-of-war between buyers and sellers, which in turn helped temper the downtrend.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt9424b9246553948e/6858a79624af86e850f8724f/XAUUSD_2025-06-23_09-29-20.png" alt="Technical Picture: Market Struggles to Break Key Resistance" style="text-align: center;" /></div></figure><p>The week opened with a $22 gap higher on Monday, bringing gold back to retest the $3,380 level. If downside pressure persists, support could emerge near the 50-day moving average and the $3,280 mark. To the upside, $3,450 remains a well-tested resistance zone. A sustained break above this level would be necessary for bulls to regain confidence in a potential test - and eventual breakout - the all-time high at $3,500.</p><h2>Geopolitical Calm Shattered by U.S. Strikes, Uncertainty Lingers</h2><p>Just as markets were starting to grow numb to the Middle East conflict, convinced that the Middle East conflict had not materially disrupted oil exports, the narrative shifted sharply over the weekend. The U.S. military launched strikes on three of Iran’s nuclear enrichment facilities, an escalation that surprised many and reignited concerns over regional instability. Although Iran has yet to respond formally, the move is widely viewed as crossing a major red line, significantly raising the odds of retaliatory action.</p><p>The market reaction was swift. Gold opened the week with a sharp gap higher, reflecting renewed safe-haven demand. While a full-blown escalation may still be unlikely, the perceived risk premium has expanded.</p><p>Betting markets have increased the implied probability of Iran attempting to block or disrupt traffic through the Strait of Hormuz - a move that could trigger a spike in oil prices and global inflation expectations. Even the possibility of such disruption is enough to rekindle investor interest in gold as a geopolitical hedge, especially in an already fragile macro environment.</p><h2>Mixed U.S. Data Paints a Clouded Outlook</h2><p>With geopolitical tensions fading into the background, markets have begun to reassess domestic fundamentals, starting with recent U.S. data.</p><p>Macroeconomic signals from the U.S. remain mixed. The University of Michigan’s June consumer sentiment index jumped from 52.2 to 60.5, while inflation expectations moderated, suggesting near-term relief from stagflation concerns. This marginally improved risk sentiment, reducing immediate demand for gold as a hedge.</p><p>However, broader indicators suggest a gradual loss of economic momentum. May’s retail sales control group exceeded expectations, but the headline figure declined 0.9% month-on-month - the sharpest drop since March 2023. Initial jobless claims continued to climb, highlighting labor market softness.</p><p>At the latest FOMC meeting, policymakers maintained a cautious “wait-and-see” stance. The updated economic projections showed higher inflation and slower growth, hinting at rising stagflation risks. The divergence among committee members signals that rate path uncertainty is unlikely to ease in Q3, leaving gold well-positioned as a portfolio stabilizer.</p><h2>Fiscal Strain Returns to the Fore</h2><p>Fiscal risks are also resurfacing. The U.S. federal deficit widened to $316 billion in May, bringing the year-to-date total to $1.36 trillion. Interest payments alone are projected to reach $1.2 trillion this year.</p><p>In this context, former President Trump’s proposed “Big and Beautiful Act” could further elevate debt levels. While the plan outlines tax cuts followed by spending reductions, the interim effect may be an enlarged fiscal gap. In the absence of a credible long-term fiscal consolidation plan, structural tailwinds for gold are likely to persist well into H2 2025.</p><p>Combined with the Fed’s cautious stance, this backdrop supports ongoing gold demand as a hedge against macro instability.</p><h2>Negative Correlation with the Dollar Adds Further Support</h2><p>Another supportive factor lies in gold’s historically strong inverse relationship with the DXY. Over the past year, this correlation has averaged approximately -0.96.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt0bcbb152228f32d7/685500bb9077d4da1027de82/XAUUSD_2025-06-20_12-54-53.png" alt="Negative Correlation with the Dollar Adds Further Support" style="text-align: center;" /></div></figure><p>Should credit risk intensify, the dollar weakens, and the Fed maintains a dovish posture under a second Trump administration, a bearish outlook for the dollar may provide additional tailwinds for gold.</p><h2>Gold Holds Steady Amid Mixed Drivers, Awaiting Clear Direction</h2><p>In summary, gold has pulled back after a sharp rally, settling into a consolidation phase. This reflects the market’s ongoing reassessment of geopolitical risks, the U.S. economic outlook, and shifting tariff policies.</p><p>As the market continues to price in the latest developments between the U.S. and Iran, gold remains range-bound at elevated levels, with no clear trend emerging. Meanwhile, traditional factors like tariffs, inflation, and economic slowdown also have the potential to cause price fluctuations.</p><p>As a result, unless geopolitical tensions escalate sharply, cautious sentiment is likely to keep gold trading within a relatively narrow band near these highs. Although bears hold a temporary edge, given the market’s renewed sensitivity to geopolitical news, buying dips appears more prudent than initiating shorts at current levels.</p><h2>Key Risks and Catalysts Ahead</h2><p>Looking ahead, the situation in the Middle East will remain under close scrutiny, especially the possibility of Iran targeting U.S. military bases, which could further escalate tensions. If the conflict intensifies significantly, gold prices may rise above the $3,450 mark.</p><p>Additionally, the upcoming June core PCE data from the U.S. is expected to draw considerable attention. Market consensus forecasts a 0.1% increase MoM and a 2.6% rise YoY.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blta0e484a16959803e/6858a841e6758b291090bdad/Screenshot_2025-06-23_at_10.27.29_AM.png" alt="Key Risks and Catalysts Ahead" style="text-align: center;" /></div></figure><p>If oil prices continue to rise and inflation shows signs of picking up, the Fed may choose to maintain a wait-and-see approach. However, if inflation cools down alongside earlier indications of labor market weakness from rising jobless claims, the Fed is likely to adopt a more dovish stance at its July meeting. Such a shift could provide additional support for gold prices.</p><p>As gold market volatility heats up and key events unfold, seize the moment with <a href="https://www.pepperstone.com/en-au/go/gold-2024/">Pepperstone’s gold CFDs</a> - now offering spreads reduced by up to 30% to explore market opportunities.</p>

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Gold Outlook: Consolidation Elevated Levels Amid Geopolitical Uncertainty

<p>Gold experienced a turbulent week, marked by a sharp rally followed by an equally swift reversal. Prices briefly surged above $3,450 amid intensifying tensions in the Middle East, before retreating as safe-haven demand quickly cooled.</p><p>Although the U.S. military formally intervened in the Middle East conflict last Sunday by striking Iran’s nuclear facilities, gold failed to sustain its upward momentum following a gap higher at Monday’s open. More notably, there were limited panic-driven safe-haven inflows. This reflects a cautious tone in the market, with traders appearing to take a wait-and-see approach to the evolving news flow.</p><p>While geopolitical risk remains a key focus, investors cannot ignore a range of more traditional macroeconomic drivers—particularly U.S. growth prospects, fiscal sustainability, and ongoing developments in trade and tariffs.</p><h2>Technical Picture: Market Struggles to Break Key Resistance</h2><p>On the daily XAUUSD chart, bears dominated the market last week. After briefly breaking above the key resistance level at $3,430 on Monday, gold failed to stage a meaningful breakout, with the battle between bulls and bears quickly shifting back to the $3,380 region.</p><p>Prices then edged lower in a steady decline throughout the week. However, toward the end of the week, intensified two-way flows pointed to a fierce tug-of-war between buyers and sellers, which in turn helped temper the downtrend.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img asset_uid="blt9424b9246553948e" alt="XAUUSD_2025-06-23_09-29-20.png" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt9424b9246553948e/6858a79624af86e850f8724f/XAUUSD_2025-06-23_09-29-20.png" style="text-align: center;" /></div></figure><p>The week opened with a $22 gap higher on Monday, bringing gold back to retest the $3,380 level. If downside pressure persists, support could emerge near the 50-day moving average and the $3,280 mark. To the upside, $3,450 remains a well-tested resistance zone. A sustained break above this level would be necessary for bulls to regain confidence in a potential test - and eventual breakout - the all-time high at $3,500.</p><h2>Geopolitical Calm Shattered by U.S. Strikes, Uncertainty Lingers</h2><p>Just as markets were starting to grow numb to the Middle East conflict, convinced that the Middle East conflict had not materially disrupted oil exports, the narrative shifted sharply over the weekend. The U.S. military launched strikes on three of Iran’s nuclear enrichment facilities, an escalation that surprised many and reignited concerns over regional instability. Although Iran has yet to respond formally, the move is widely viewed as crossing a major red line, significantly raising the odds of retaliatory action.</p><p>The market reaction was swift. Gold opened the week with a sharp gap higher, reflecting renewed safe-haven demand. While a full-blown escalation may still be unlikely, the perceived risk premium has expanded.</p><p>Betting markets have increased the implied probability of Iran attempting to block or disrupt traffic through the Strait of Hormuz - a move that could trigger a spike in oil prices and global inflation expectations. Even the possibility of such disruption is enough to rekindle investor interest in gold as a geopolitical hedge, especially in an already fragile macro environment.</p><h2>Mixed U.S. Data Paints a Clouded Outlook</h2><p>With geopolitical tensions fading into the background, markets have begun to reassess domestic fundamentals, starting with recent U.S. data.</p><p>Macroeconomic signals from the U.S. remain mixed. The University of Michigan’s June consumer sentiment index jumped from 52.2 to 60.5, while inflation expectations moderated, suggesting near-term relief from stagflation concerns. This marginally improved risk sentiment, reducing immediate demand for gold as a hedge.</p><p>However, broader indicators suggest a gradual loss of economic momentum. May’s retail sales control group exceeded expectations, but the headline figure declined 0.9% month-on-month - the sharpest drop since March 2023. Initial jobless claims continued to climb, highlighting labor market softness.</p><p>At the latest FOMC meeting, policymakers maintained a cautious “wait-and-see” stance. The updated economic projections showed higher inflation and slower growth, hinting at rising stagflation risks. The divergence among committee members signals that rate path uncertainty is unlikely to ease in Q3, leaving gold well-positioned as a portfolio stabilizer.</p><h2>Fiscal Strain Returns to the Fore</h2><p>Fiscal risks are also resurfacing. The U.S. federal deficit widened to $316 billion in May, bringing the year-to-date total to $1.36 trillion. Interest payments alone are projected to reach $1.2 trillion this year.</p><p>In this context, former President Trump’s proposed “Big and Beautiful Act” could further elevate debt levels. While the plan outlines tax cuts followed by spending reductions, the interim effect may be an enlarged fiscal gap. In the absence of a credible long-term fiscal consolidation plan, structural tailwinds for gold are likely to persist well into H2 2025.</p><p>Combined with the Fed’s cautious stance, this backdrop supports ongoing gold demand as a hedge against macro instability.</p><h2>Negative Correlation with the Dollar Adds Further Support</h2><p>Another supportive factor lies in gold’s historically strong inverse relationship with the DXY. Over the past year, this correlation has averaged approximately -0.96.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img asset_uid="blt0bcbb152228f32d7" alt="XAUUSD_2025-06-20_12-54-53.png" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt0bcbb152228f32d7/685500bb9077d4da1027de82/XAUUSD_2025-06-20_12-54-53.png" style="text-align: center;" /></div></figure><p>Should credit risk intensify, the dollar weakens, and the Fed maintains a dovish posture under a second Trump administration, a bearish outlook for the dollar may provide additional tailwinds for gold.</p><h2>Gold Holds Steady Amid Mixed Drivers, Awaiting Clear Direction</h2><p>In summary, gold has pulled back after a sharp rally, settling into a consolidation phase. This reflects the market’s ongoing reassessment of geopolitical risks, the U.S. economic outlook, and shifting tariff policies.</p><p>As the market continues to price in the latest developments between the U.S. and Iran, gold remains range-bound at elevated levels, with no clear trend emerging. Meanwhile, traditional factors like tariffs, inflation, and economic slowdown also have the potential to cause price fluctuations.</p><p>As a result, unless geopolitical tensions escalate sharply, cautious sentiment is likely to keep gold trading within a relatively narrow band near these highs. Although bears hold a temporary edge, given the market’s renewed sensitivity to geopolitical news, buying dips appears more prudent than initiating shorts at current levels.</p><h2>Key Risks and Catalysts Ahead</h2><p>Looking ahead, the situation in the Middle East will remain under close scrutiny, especially the possibility of Iran targeting U.S. military bases, which could further escalate tensions. If the conflict intensifies significantly, gold prices may rise above the $3,450 mark.</p><p>Additionally, the upcoming June core PCE data from the U.S. is expected to draw considerable attention. Market consensus forecasts a 0.1% increase MoM and a 2.6% rise YoY.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img alt="Screenshot_2025-06-23_at_10.27.29_AM.png" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blta0e484a16959803e/6858a841e6758b291090bdad/Screenshot_2025-06-23_at_10.27.29_AM.png" style="text-align: center;" /></div></figure><p>If oil prices continue to rise and inflation shows signs of picking up, the Fed may choose to maintain a wait-and-see approach. However, if inflation cools down alongside earlier indications of labor market weakness from rising jobless claims, the Fed is likely to adopt a more dovish stance at its July meeting. Such a shift could provide additional support for gold prices.</p><p>As gold market volatility heats up and key events unfold, seize the moment with <a href="https://www.pepperstone.com/en-au/go/gold-2024/">Pepperstone’s gold CFDs</a> - now offering spreads reduced by up to 30% to explore market opportunities.</p>

Gold Outlook: Consolidation at Elevated Levels Amid Geopolitical Uncertainty

<p>Last Friday, geopolitical tensions in the Middle East sharply intensified as the sixth round of U.S.-Iran negotiations abruptly collapsed, triggering significant market volatility. Safe-haven buying surged, and fears of supply disruptions pushed WTI crude spot prices up to $76 per barrel—marking the highest level since January 2025.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img asset_uid="blt699374fc6771bd3f" alt="SPOTCRUDE_170625.png" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt699374fc6771bd3f/68521cef0496f2cff794338c/SPOTCRUDE_170625.png" style="text-align: center;" /></div></figure><p>Markets have begun to reassess the potential damage a military conflict might inflict on Middle Eastern oil production and transport infrastructure, as well as the implications should the U.S. become directly involved.</p><p>While the supply-side shocks are centered in the Middle East, the true arbiter of future crude pricing power may not be the oil producers, but the world’s largest buyer: China. For the world’s biggest crude importer, the recent geopolitical turmoil is both a short-term amplifier of imported inflation and a stress test for medium- to long-term energy security and strategic reserves.</p><h2>Strait of Hormuz Blockade Remains a Tail Risk</h2><p>To date, the conflict has not directly impacted critical energy infrastructure, but the security of oil shipments through the Strait of Hormuz remains the energy market’s most feared “black swan.” This narrow channel accounts for nearly one-fifth of global oil shipments, with daily volumes exceeding 21 million barrels. A closure or disruption here would spike transportation and insurance costs, potentially forcing buyers to reroute supplies and causing a drastic reshaping of global supply chains.</p><p>That said, based on historical precedents and geopolitical dynamics, a full blockade remains highly unlikely. Factors such as Iran’s economic constraints, its diplomatic ties with neighbors like Oman, and the military capabilities of the U.S. and its allies, make a complete “closure” scenario more of a market-amplified tail risk during volatility than a base case.</p><p>Even if this low-probability event occurs, alternate routes such as the Abu Dhabi pipeline (capacity around 1.5 million barrels/day) and the East-West pipeline (about 5 million barrels/day), operated by Saudi Arabia, Iraq, and the UAE, could partially offset export disruptions.</p><h2>If Iranian Supply Disrupts, How Will China Respond?</h2><p>From January to May 2025, Iran’s oil exports averaged approximately 1.64 million barrels per day, with a significant share destined for Asian markets. On the surface, any disruption to Iranian exports appears to pose supply risks for China. However, China’s resilience to an Iranian cutoff has grown considerably.</p><figure style="text-align: center"><div data-img-caption-container="true" style="display: inline-block; text-align: center;"><img asset_uid="blt894e2b8867700763" alt="red oil barrels" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt894e2b8867700763/67d004f0a67cbb7b2d73810a/red_oil_barrels.jpg" style="text-align: center;" /></div></figure><p>China has steadily diversified its import sources to lower costs and mitigate risks. In H1 2023, Iran ranked as China’s third-largest crude supplier. Since 2024, however, its position has been overtaken by Russia (about 20%), Saudi Arabia (around 14%), and Malaysia (about 13%).</p><p>Notably, Russian crude increasingly settles in RMB through a maturing trade mechanism that partially circumvents the U.S. dollar system, significantly reducing sanction-related vulnerabilities.</p><p>Moreover, uncertainty around Iranian exports to China has risen, driven by unilateral contract breaches, suspension of deliveries of contracted crude in December 2024, and legacy overhangs such as the 25 million barrels stuck in ports since 2018. Chinese firms increasingly view Iran as a “price-competitive yet high-risk” supplier, prompting a strategic shift toward more stable alternatives like Russia.</p><p>Consequently, despite Iran maintaining a six-year high production level of 3.36 million barrels per day in May, its exports to China have declined from 1.5 million to below 1.2 million barrels per day. If conflict further curtails Iranian exports, China’s crude supply might face pressure, but the impact should remain limited.</p><h2>Weak Domestic Demand Softens Oil Price Impact</h2><p>On the demand side, China’s crude oil market remains moderate, acting somewhat like a “shock absorber” to blunt the direct economic impact of rising prices. Customs data shows a nearly 27% year-on-year drop in refined oil imports during the first five months of 2025, reflecting both weak external demand and an as-yet incomplete domestic recovery. In other words, oil price gains have not yet been amplified by strong internal consumption.</p><p>Structurally, while some refineries undergo seasonal maintenance, overall industrial crude production and refinery utilization rates remain relatively stable. This “weak demand plus steady supply” dynamic provides China with policy buffer space.</p><p>In the short term, rising international oil prices do not pose a substantial threat to China’s energy supply system. The real concern lies in how higher energy costs will ripple through midstream processing to downstream manufacturing and consumption sectors.</p><h2>Imported Inflation is The Biggest Risk, Policy Response Expected to Accelerate</h2><p>Crude oil, as a fundamental raw material, passes price hikes quickly through transport, chemicals, and manufacturing chains, pushing CPI upward and exerting hidden pressure on the macroeconomy.</p><p>In my view, this inflationary pressure will both squeeze profit margins—especially in transportation, construction materials, and agricultural processing—and dampen consumer confidence, delaying demand recovery. Crucially, China’s economic rebound still relies heavily on policy support. If inflation expectations spiral, monetary policy flexibility will shrink, forcing a more cautious easing pace and complicating the balancing act between “growth stability” and “inflation control.”</p><p>I believe policymakers are likely to accelerate targeted measures, including increased fiscal stimulus and selective tax and fee cuts for energy-intensive industries; temporarily decoupling domestic refined oil prices from international markets; and deploying strategic crude reserves to stabilize domestic prices and expectations. Recent increases in import shares from Russia and Saudi Arabia also reflect efforts to leverage price discounts and hedge against potential supply shocks.</p><p>At the same time, a sharp rise in oil import bills could pressure China’s current account balance, particularly amid weakening export momentum. This may trigger indirect depreciation expectations for the RMB and raise capital outflow concerns. While manageable short term, investor sentiment might increasingly favor resource sector equities like oil, coal, and natural gas over cost-pressured sectors such as manufacturing and transportation.</p><h2>Key Risks to Watch: OPEC+ Meeting and US Inventory Trends</h2><p>Compared to Iran’s all-or-nothing stance, a more probable scenario is a U.S.-Iran agreement that pauses Iran’s high-level uranium enrichment, which could ease oil prices.However, if Israel strikes Iranian facilities or the Strait of Hormuz is blocked, triggering localized conflict, crude prices could spike sharply in the short term.</p><p>For China, a significant supply disruption would translate primarily into inflationary pressure, followed by energy security and policy challenges. Yet China’s energy diversification and strategic reserves provide buffers that keep systemic risks relatively manageable.</p><p>Beyond geopolitical factors, two additional drivers may influence oil prices in the near term. First, the upcoming OPEC+ ministerial meeting on July 6. While production increases are currently expected to continue, recent price rebounds may prompt producers to reconsider the pace of output growth. Signals of “production pause” or “market-responsive flexibility” would likely be interpreted as a bid to stabilize prices, providing strong support on the downside.</p><p>Second, with the summer driving season underway in the U.S. and Europe, gasoline and diesel consumption will rise substantially. If crude inventories decline faster than expected in the coming weeks, market expectations for demand recovery will strengthen, giving oil prices further upward momentum. Especially with refinery utilization rising and supply chains not fully normalized, seasonal consumption and potential supply-demand mismatches could push prices even higher.</p><p>In summary, although current moderate demand and stable supply help insulate China temporarily from oil price shocks, vigilance is warranted against the risk of imported inflation should prices and demand rise simultaneously alongside external recovery and peak travel season.</p>

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Middle East Tensions Escalate: How Is China Managing Crude Oil Volatility?