Last week (April 13-17), gold prices continued to fluctuate in response to developments in the Middle East situation, with the overall volatility center shifting slightly higher. Contradictory statements from Federal Reserve officials during the week, combined with a slow pace of balance sheet expansion, left gold lacking strong momentum incentives.
Regarding market perspectives, the gold market remained volatile last week due to changes in the Middle East situation, with its general fluctuation range edging up.
While the overall Middle East situation showed signs of easing, localized tensions persisted, with both the US and Iran exerting pressure over the Strait of Hormuz. Following a temporary Israel-Lebanon ceasefire, Iran announced a provisional reopening of the strait. However, due to the US maintaining its blockade of Iranian ports, Iran reinstated stricter controls over the strait on the 18th. Throughout this period, gold displayed an initial rise followed by a retreat, indicating that short-term price movements remain significantly influenced by geopolitical sentiment.
Several Federal Reserve officials delivered speeches during the week. Apart from consistent dovish commentary from one member, even Governor Waller, who is generally considered part of the dovish camp, expressed cautious views. With inflationary pressures building and the job market characterized by low layoffs and low hiring, the probability of interest rate cuts in the near to medium term remains low. This has acted as a constraint on the strength of any gold price rebound.
The Senate confirmation hearing for the new Fed Chair nominee, Wash, is scheduled for this week. Markets widely anticipate that Wash might convey dovish signals regarding monetary policy. However, as this expectation is already partially priced in, gold may still find it difficult to break out of its current consolidation phase in the short term. A lack of fresh bullish catalysts suggests gold prices will likely continue consolidating, potentially forming a base.
In terms of last week's market developments regarding the US economy: March inflation pressures came in lower than expected. The US Producer Price Index (PPI) year-on-year growth rate increased by 0.6 percentage points to 4.0%. Although PPI rose year-on-year, partly due to higher energy prices, the figure was notably below the market expectation of 4.6%. The month-on-month PPI growth held steady at 0.5%, also falling short of the anticipated 1.1%. This suggests the inflationary pass-through effect from rising oil prices has been limited so far.
US headline CPI re-entered the '3% range' in March. The US Consumer Price Index (CPI) rose 3.3% year-on-year, up from a previous 2.4%. Month-on-month, CPI increased by 0.9%, matching expectations, compared to a prior 0.3%. The core CPI, which excludes food and energy, rose 2.6% year-on-year and 0.2% month-on-month, both figures coming in below market forecasts of 2.7% and 0.3%, respectively. In the short term, factors like rising oil prices and tariff effects could keep inflation elevated, warranting close attention to subsequent changes in inflation expectations.