Iran-Israel Ceasefire and U.S.-China Rare Earth Deal Ease Geopolitical Risk
The Iran-Israel ceasefire brokered by President Trump earlier this week remains intact, reducing a significant geopolitical premium that previously supported gold.
Meanwhile, a White House official confirmed an agreement with China to expedite rare earth shipments, reducing concerns over supply disruptions ahead of the July 9 reciprocal tariff deadline. The dollar’s recent weakness has provided no support, underscoring gold’s current vulnerability as safe-haven demand continues to fade.
PCE Data in Focus: Will Inflation Force the Fed’s Hand?
Today’s release of the U.S. Personal Consumption Expenditures (PCE) data will be critical for traders assessing the Federal Reserve’s policy path. Richmond Fed President Thomas Barkin noted tariffs are likely to push inflation higher over the coming months, but recent reports indicate muted inflation pressures so far.
April’s headline PCE rose 2.1% year over year, while core PCE increased 2.5%. For May, Wells Fargo expects headline PCE to print at 2.3% YoY and core PCE at 2.6%, signaling a modest uptick.
A hotter-than-expected PCE print could reinforce the Fed’s higher-for-longer stance, potentially driving Treasury yields higher and adding downside pressure to gold, which remains unattractive in a high-rate environment due to its zero-yield nature. A softer print, however, may trigger dollar weakness and a relief bid in gold, but the loss of safe-haven flows will limit any sharp upside unless accompanied by new geopolitical tensions or a shift in Fed rhetoric.
Gold Loses Luster as Real Yields Remain Firm
Gold is down more than 2% this week, extending a decline of over $200 from its record highs in April. Analysts at City Index and FOREX.com note that while the current pullback helps unwind overbought technical conditions, the absence of strong catalysts and firm real yields continue to weigh on gold’s upside potential. Market participants are focusing on the interplay between inflation data and Fed commentary to gauge timing for potential rate adjustments.
