Houthi Attacks On Saudi Arabia Cause Fuel Prices To Fall Over 1%, Gold Prices Fall Over 1%, Awaiting Inflation Data Ahead!
On Tuesday, spot gold fell 1.15%, hitting an intraday low of nearly a week. Yemen's Houthi forces launched large-scale attacks on Saudi energy facilities, and military confrontations between the U.S. and Iran in the Strait of Hormuz continue to escalate, heightening inflation concerns and supporting expectations of Fed rate hikes, putting pressure on gold prices. This performance echoes previous strong employment data. Last Friday, U.S. August nonfarm payrolls surged and the unemployment rate remained steady at 4.1%, showing that the labor market remains resilient and directly prompting the market to reassess the Fed's policy path.
What truly intensified pressure on gold prices was the synchronized surge in oil prices. On Tuesday, crude oil briefly hit a new high since July 24, reaching a six-week high and entering technically overbought territory. The direct trigger for oil prices was an Iran-backed attack on energy facilities in southern Saudi Arabia by the Yemeni Houthi militia, which caught fire and injured more than 70 people in four southern Saudi cities. Meanwhile, Tehran threatened to launch an "economic war" against the U.S., and the Middle East conflict has entered its seventh month, with market concerns over supply disruptions surging.
High oil prices have directly reinforced inflation expectations. Rising energy prices often drive overall prices higher through cost transmission, and the Fed's main concern is whether inflation is truly under control. CME FedWatch tools show that investors currently expect about a 60% chance of the Fed raising rates at the September 15-16 policy meeting, significantly higher than the roughly 50% before the employment data release. The market is still digesting the stronger-than-expected employment report and awaiting this week's CPI and PPI data, while rising oil prices themselves support rate hike forecasts.
Echoing the gold market is the U.S. Treasury market. On Tuesday, U.S. Treasury yields edged higher, with the two-year yield at 4.394% and the 10-year at 4.798%. Investors began adjusting their positions for scenarios where interest rates could rise further, inflation remains elevated for a longer period, and the economy remains resilient. However, the market did not experience panic selling. The U.S. Treasury auctioned $58 billion in three-year Treasuries on Tuesday, with strong demand. The winning yield was 4.474%, slightly below the pre-issued level, and the bid-to-cover ratio reached 2.72 times, the highest since November last year. This indicates that while short-term interest rate expectations are heating up, investors still have willingness to allocate to medium- and short-term U.S. Treasuries.
The market is awaiting the Producer Price Index and Consumer Price Index, which will truly determine the Fed's decision next week. Thursday's PPI and Friday's CPI will serve as a litmus test for both gold and bond markets. If inflation data again exceeds expectations, the probability of rate hikes may rise further, further suppressing gold; If the data is moderate, gold prices may have some breathing room.
Market Insight:
The current adjustment in gold prices is the result of a multi-force struggle: oil prices have surged sharply due to the Middle East conflict, igniting inflation concerns and boosting expectations of a Fed rate hike in September; Strong employment data further reinforces this trajectory; The upcoming PPI and CPI data released this week will be key variables determining the short-term direction of gold prices.
