Gold-related stocks in Hong Kong are trading lower across the board. At the time of writing, Tongguan Gold (HKEX: 00340) shares are down 3.16% to HK$1.84. Shandong Gold (HKEX: 01787) shares have fallen 3.05% to HK$17.81. Zijin Gold International (HKEX: 02259) shares are down 2.85% to HK$95.5. Zijin Mining (HKEX: 02899) shares have declined 2.73% to HK$29.18. Chifeng Gold (HKEX: 06693) shares are lower by 2.25% at HK$27.84.

Market Drivers and Context

The decline follows escalating geopolitical tensions between the US and Iran, which has increased market expectations for further interest rate hikes by the Federal Reserve. In early trading on July 13th, the price of gold continued its downward trend, with spot gold falling below $4,100 per ounce. The US Central Command reported that American forces had initiated a third round of military strikes against Iran within a week. Subsequently, Iran's Revolutionary Guard Corps Navy announced a blockade of the Strait of Hormuz in the early hours of the 12th, prohibiting all vessel traffic until the ban is lifted.

Adding to the monetary policy pressure, a noted financial journalist reported that some colleagues of Federal Reserve Chair Jerome Powell are growing increasingly concerned about inflation, potentially pushing for a discussion on raising interest rates at the Fed's upcoming meeting scheduled for July 28-29.

Analyst Perspective on Precious Metals

Analysts at Minmetals Futures suggest that precious metals are currently experiencing volatile declines amid the recurring Middle East tensions and heightened expectations for Fed rate hikes. The breakdown of temporary coordination talks between the US and Iran has spurred a rebound in energy prices, bringing inflation-driven trading logic back to the forefront of the market. With US Treasury yields steadily climbing and the US Dollar Index remaining firm at elevated levels, real interest rates continue to rise, placing downward pressure on the valuation of precious metals.

Given the Federal Reserve's policy priority of curbing inflation, a prolonged and intensifying conflict between the US and Iran that disrupts global crude oil supply could potentially delay the anticipated slowdown in US inflation. In such a scenario, the upside potential for precious metals would likely remain constrained.