Gold Bounces Off Two-Week Low as Market Awaits US Inflation Data, Powell’s Successor’s First Hill Testimony
Gold edged up to $4,013.93 in Asian trade Tuesday, clawing back from a two-week low as investors brace for US CPI data and Fed Chair Kevin Warsh’s debut on Capitol Hill. The rebound follows a sharp selloff Monday triggered by a Middle East oil shock that fanned rate-hike fears.
International gold prices edged up from a two-week low during Asian trading on Tuesday (July 14), as the market zeroes in on upcoming US inflation data and the first congressional testimony from Fed Chair Kevin Warsh. The prior session saw a sharp selloff after escalating Middle East tensions sent oil prices soaring and reinforced expectations that rates will stay higher for longer.
- Tuesday’s bounce: Spot gold was last at $4,013.93 per ounce as of afternoon trading in Beijing, up 0.3% from the prior close and off the two-week low hit during the session.[CNBC]
- Monday’s rout: On Monday (July 13), spot gold settled 1.5% lower at roughly $4,059.11, after falling as much as 1.55% to a two-week trough.[CNBC]
- Key catalyst: The direct trigger for Monday’s decline was a military clash between the US and Iran near the Strait of Hormuz, with Tehran hinting at a potential closure of the key oil chokepoint. That sent global crude prices surging more than 3% on the day.[KITCO]
- Rate expectations heat up: The oil spike stoked inflation fears, pushing the market-implied probability of a Fed rate hike in September to roughly 69%, up from 63% last week.[KITCO]
- Key events this week: The calendar is packed with US June CPI and PPI data, retail sales figures, and Fed Chair Kevin Warsh’s semiannual monetary policy testimony before Congress.[KITCO]
- Positioning shift: In the week ended July 7, COMEX gold speculative net long positions fell by 1,964 contracts to 114,854, snapping a three-week streak of increases.[KITCO]
International gold prices edged higher during Asian trading on Tuesday (July 14), recovering from the two-week low hit in the prior session. Spot gold was last at $4,013.93 per ounce as of afternoon trading in Beijing, up 0.3%[CNBC]. The market is holding its breath for a slate of key US economic data this week, led by the June CPI, and for Fed Chair Kevin Warsh’s first public appearance on Capitol Hill, looking for clues on the inflation path and the policy outlook. The prior session had hammered gold as geopolitical tensions in the Middle East flared violently.
Hormuz Crisis Triggers Oil-Gold Selloff
On Monday (July 13), spot gold tumbled 1.5% to settle near $4,059.11 per ounce, after touching a two-week low of roughly $4,055.40 intraday[CNBC][KITCO]. The direct catalyst was a sudden escalation in military hostilities between the US and Iran near the Strait of Hormuz. Reports indicated large-scale missile and drone exchanges between US and Iranian forces in the area, with Tehran signaling it could close the world’s most vital oil transit chokepoint. That sent international crude prices surging more than 3% on the day[KITCO].
The oil spike stoked fears that energy costs would push inflation higher, reinforcing the view that the Fed may need to keep rates elevated for longer. That expectation quickly transmitted to bond markets, pushing the US 10-year Treasury yield to roughly 4.582% in early Asian trading Monday, while the 2-year yield climbed above 4.20%[KITCO]. Higher rates increase the opportunity cost of holding non-yielding assets like gold, putting direct pressure on the metal.
Analysts Weigh Geopolitical Risk vs. Macro Logic
Market analysts largely attributed gold’s apparent “safe-haven failure” on Monday to macro logic overriding geopolitical risk. “The renewed hostilities in the Gulf have rekindled market concerns about inflation and further Fed tightening, creating additional headwinds for gold through higher bond yields and a stronger dollar,” said Ole Hansen, analyst at Saxo Bank[KITCO].
Kitco’s morning report noted that the Strait of Hormuz situation’s direct geopolitical bid for gold was offset by the macro channel: the oil price spike raised inflation risk, keeping yields firm and supporting the dollar[KITCO]. The report argued that a softer CPI print would relieve pressure from real yields, giving gold a clearer path to reclaim the $4,091-$4,107 resistance zone. Conversely, another surge in oil would keep the market fixated on inflation risk and the Fed’s reaction function[KITCO].
Hansen also warned that the Middle East situation and rising oil prices, combined with low liquidity during the summer holiday season, are key risks that could push gold out of its current $3,900-$4,200 range[KITCO].
Key Week Ahead: Inflation Data and Fed Testimony
A heavy slate of events this week could set the tone for gold’s next move. On the data front, the US June CPI and PPI are due, along with retail sales figures and weekly initial jobless claims[KITCO]. These releases will provide the latest read on whether inflationary pressures are persisting.
On the monetary policy front, Fed Chair Kevin Warsh will deliver his first semiannual monetary policy testimony to Congress on Tuesday and Wednesday. The market will be parsing his comments on the economy, inflation, and the future rate path for policy clues[KITCO]. According to the CME FedWatch Tool, traders currently price in roughly a 69% probability of a rate hike in September, up from 63% last week[KITCO].
On the positioning front, data released Friday showed that in the week ended July 7, COMEX gold speculators cut their net long positions by 1,964 contracts to 114,854, ending a three-week streak of increases[KITCO]. The move suggests some speculative money took profits or stepped to the sidelines amid the recent spike in volatility.
Sources
- CNBC — Gold recovers from two-week low ahead of US inflation figures
- KITCO — Gold extends decline as Middle East tensions bolster higher-for-longer rate view
- KITCO — Gold and silver slide as Hormuz oil shock lifts yields - Kitco AM Report
- CNBC — Gold slides over 1% as oil surges on Strait of Hormuz closure fears
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