Although tensions in the Middle East continue to escalate and oil prices remain at a high level, StoneX believes that the decisive factor determining the trend of gold prices in the short term is still the monetary policy of the US Federal Reserve (Fed) and the developments of US government bond yields.
In the "Highlights on the Precious Metals Market" report released on July 20, Ms. Rhona O'Connell - Head of Market Analysis for Europe, Middle East, Africa and Asia (EMEA & Asia) at StoneX - said that the risk of gold price depreciation is still higher than the possibility of forming a sustainable rally.
According to StoneX, the physical gold market has not yet shown strong enough momentum to reverse the trend. Buying activity in some Far Eastern markets has improved after investors stood aside to observe, but this buying volume is almost eliminated by selling pressure in other regions of Asia.
Meanwhile, demand in the Middle East is still quite sluggish as gold is mainly traded with discounts. India recorded signs of renewed interest in gold and silver, but the scale is still not large enough to create momentum to help precious metal prices break through.
StoneX believes that institutional investors still maintain a cautious mentality and only react to short-term fluctuations related to interest rates or geopolitical events.
The report emphasizes that a narrow fluctuation range is still the dominant state of the gold market, and assesses that the possibility of a price decrease is still slightly higher than the possibility of forming a prolonged upward trend.
One of the main reasons comes from inflationary pressure that has not really been eliminated.
StoneX analyzed that in the US consumer price index (CPI) basket for June 2026, the energy group accounted for about 8% of the total contribution, higher than the usual level of 6–7%. Although the June CPI decreased mainly thanks to energy prices falling nearly 6% in the month, this organization believes that this trend is likely to reverse in July when oil prices turn around and increase sharply.
According to StoneX, WTI oil is currently still about 24% higher than the same period last year. In addition, prolonged conflict in the Middle East may cause oil prices to remain high in the near future, while supply chain breakdowns will continue to put pressure on transportation, production and logistics costs.
In that context, the Fed will face a difficult problem between controlling inflation and maintaining economic growth.
StoneX noted that the Fed's policy meeting on July 28-29 took place when the US central bank entered a "blackout period" of silence. The report said Fed officials are still divided on monetary policy prospects, with about half leaning towards the possibility of further tightening if inflation does not decrease, while the rest lean towards keeping interest rates unchanged.
Notably, StoneX assesses that the yield of 10-year US government bonds is becoming the most important indicator for the gold market. Yields have increased from below 4% at the end of February to about 4.6%, creating clear pressure on precious metals due to increasing the opportunity cost of holding unprofitable assets.
Data on capital flows also shows that investors have not yet strongly returned to gold.
According to StoneX, data from the US Commodity Futures Trading Commission (CFTC) as of July 14 shows that the net buying positions of the money management fund group on the COMEX exchange are still about 23% lower than the 12-month average.
In the ETF fund market, data from the World Gold Council shows that total gold holdings only increased net by about 15 tons from the beginning of the year to July 10. Meanwhile, the holdings of silver ETF funds decreased by more than 2,400 tons since the beginning of the year, reflecting the cautious sentiment of investment capital flows towards the precious metal group.
StoneX believes that in the context that US bond yields are still high and expectations of interest rates have not decreased significantly, gold is likely to continue to fluctuate in a narrow range and face downward pressure in the short term.
