World gold prices closed the trading week with a decrease of about 2.5%, recording the strongest weekly decline in the past six weeks. Although inflation in the US showed signs of cooling down, the market is still under pressure from the upward momentum of oil prices and expectations that interest rates will remain at a higher level for longer.
Spot gold closed the week at 4,0017.30 USD/ounce, while August gold futures were at 3,973.10 USD/ounce. During the week, gold prices fluctuated around the 4,000 USD/ounce mark many times.
The US consumer price index (CPI) report for June showed that the rate of increase has slowed down, contributing to easing concerns that the conflict between the US and Iran will create a prolonged impact on inflation. However, this positive sentiment did not last as oil prices returned above 80 USD/barrel amid escalating military tensions in the Middle East.
According to published information, the US continues to expand its air strike campaign against Iran, while Tehran responds with attacks on US bases in the Middle East. This development increases concerns that global energy supplies could be disrupted. Brent oil prices therefore increased by more than 14% in the week.
Concerns about rising inflation from energy prices have strengthened expectations that the US Federal Reserve (Fed) may continue to maintain tight monetary policy. High interest rates reduce the attractiveness of gold. Along with that, the USD increasing for the second consecutive session also made gold more expensive for buyers holding other currencies.
The market currently assesses a 53.3% to 56% chance of the Fed raising interest rates in the September meeting, according to the CME FedWatch tool. In addition, the market is also closely monitoring new inflation signals as oil prices continue to fluctuate.
Gold prices are currently about 25-30% lower than the peak set at the end of January. Despite strong corrections, the market continues to be affected by interest rate expectations, the diễn biến of the USD, bond yields and geopolitical risks.
Next week, when the economic data release schedule does not have many notable events, the monetary policy meeting of the European Central Bank (ECB) will become the focus of the market. Current forecasts suggest that the ECB is likely to keep interest rates unchanged after the June increase, while still leaving open the possibility of policy adjustments in subsequent meetings.
