Gold-related stocks continue to face downward pressure. At the time of writing, ZIJIN GOLD INTL (02259) fell 3.87% to HK$99.30, ZIJIN MINING (02899) dropped 2.96% to HK$28.84, CHIFENG GOLD (06693) declined 2.24% to HK$24.40, and SD GOLD (01787) decreased 2.09% to HK$20.64.

Market Drivers

The latest U.S. inflation figures for May were released overnight. The Consumer Price Index (CPI) rose 4.2% year-on-year, while core CPI increased 2.9% year-on-year, both aligning with market forecasts. Analysis suggests that for gold, this data presents a mixed picture rather than a clear directional signal. The elevated headline CPI indicates that inflationary pressures remain a significant concern, limiting the Federal Reserve's ability to pivot towards a more accommodative monetary policy. However, the cooling in the core inflation measure has alleviated some market fears regarding imminent interest rate hikes, allowing gold to stage a modest recovery from its recent sharp decline.

In the short term, gold is likely to remain range-bound at lower levels. The moderation in core inflation may help ease immediate selling pressure, but the persistently high overall inflation and the difficulty for real interest rates to decline rapidly will continue to cap any significant rebound potential.

Geopolitical Tensions Intensify

Adding to the market's uncertainty, geopolitical risks have escalated sharply. U.S. military forces confirmed strikes on Iran for a second consecutive day. Iranian military officials have reportedly stated the closure of the Strait of Hormuz, prohibiting all vessel traffic. Spot gold has now fallen below the $4,100 per ounce mark, erasing all its gains for the year.

A recent report from Citi projects that if disruptions to the Strait of Hormuz persist into the summer, global demand for gold purchases could contract further, potentially pushing prices down to $3,500 per ounce by September. Citi has revised its three-month gold price target downward from $4,300 to $4,000 per ounce.