Precious metals extended their weakness on Friday, with both gold and silver prices breaking through critical support levels. The main New York gold contract fell below the $4,000 per ounce psychological level. Silver's decline was more pronounced, with the main New York silver contract dropping to around $55 per ounce. The main Shanghai silver contract saw an intraday loss exceeding 4%, breaking below the key 13,500 yuan per kilogram mark. Since the beginning of June, the main Shanghai gold contract has fallen over 10%, while the main Shanghai silver contract has plunged more than 25%.

Immediate Market Drivers

In the short term, geopolitical tensions are continuing to suppress precious metals valuations through a transmission chain of "geopolitics → oil prices → inflation → interest rate hikes." U.S.-Iranian conflict escalated this week, with reports indicating the U.S. military conducted airstrikes against Iran for a fifth consecutive night, causing shipping traffic through the Strait of Hormuz to plummet to just 10% of pre-conflict levels. Iran has stated the strait will not reopen under U.S. pressure and has reportedly ordered Houthi forces to prepare to block the Bab el-Mandeb Strait. This geopolitical tension has increased expectations for rising oil prices, thereby reinforcing inflation concerns. Although U.S. June retail sales grew 0.2% month-on-month, meeting market expectations, and initial jobless claims fell to 208,000, the lowest since May and below the expected 217,000, the weaker data was insufficient to alter rate hike expectations. Furthermore, the Philadelphia Fed Manufacturing Index surged to 41.4, far exceeding the expected 12.5 and the previous reading of 10.3. Economic resilience, combined with persistent inflation due to geopolitical disruptions, has propelled the U.S. dollar index higher and pushed U.S. Treasury yields up slightly, putting pressure on precious metals.

Medium-Term Outlook

From a medium-term perspective, expectations for Federal Reserve interest rate hikes have not fundamentally reversed and may continue to exert pressure on precious metal prices. Amidst geopolitical disturbances, fluctuating inflation, and a hawkish influence from policymakers, the gold market is expected to remain primarily weak with periods of technical recovery.