US-Iran Temporary Ceasefire Sends Oil Prices Plunging, Gold Holds at $4,075 Awaiting FOMC

On July 27 Eastern Time, spot gold showed resilience against the backdrop of a sharp decline in oil prices due to the temporary ceasefire in the U.S.-Iran conflict, while investors cautiously awaited the Fed's FOMC interest rate decision on Wednesday. As of press time, spot gold was at $4,075.60/oz, up 0.59% on the day; silver was at $58.290, up 0.45%. Over the weekend, the U.S. and Iran suspended attacks. Brent crude closed at $85.87/barrel (-6.3%), and WTI crude closed at $82.61/barrel (-7.5%), partially easing inflationary pressures transmitted through energy. However, shipping in the Strait of Hormuz has not returned to normal, and market risk premiums have not fully dissipated. The 10-year U.S. Treasury yield retreated to around 4.6%, and the U.S. dollar index DXY weakened slightly. This Wednesday's FOMC decision and Thursday's PCE inflation data will determine the short-term direction of gold prices.

I. Precious Metals Market Review

Gold: Spot gold fluctuated in a range throughout the day. It traded around $4,083 during the Asian and European sessions, briefly broke above $4,100 but failed to hold, and finally retreated to close at $4,075.60. The market remained cautious about this week's FOMC decision, with the probability of a 25-basis-point rate hike still around 33%, limiting gold's upside. On the technical side, the short-term target for the bulls is to reclaim the resistance zone of $4,162-$4,214, then challenge the 50-day moving average at $4,221; the first support level below is at $4,072, with key support at $4,041.

Silver: It performed slightly weaker than gold. Spot silver closed at $58.290. Short-term resistance levels are at $60.10 and $60.94; support levels are at $58.82 (20-day moving average) and $54.78.

Related Markets: The 10-year U.S. Treasury yield retreated to around 4.60%, and the U.S. dollar index DXY weakened slightly, providing support for dollar-denominated gold. The sharp decline in the crude oil market was the most prominent macro event of the day, with both Brent and WTI falling over 6%. However, shipping lanes in the Strait of Hormuz have not fully reopened, and the energy premium has not been completely removed.

II. U.S.-Iran Conflict and Crude Oil Market: Marginal Easing of Inflationary Pressures

The news that the U.S. and Iran suspended attacks over the weekend was the core variable of the day. Iran denied direct negotiations with Washington but confirmed discussions with Oman on restarting the Strait mechanism. The crude oil market reacted sharply, with Brent crude falling sharply from above $100 last week to $85.87. However, market analysts pointed out that this was only a "partial retracement of the risk premium" rather than a full normalization of trading — the risk to oil tankers around the Strait of Hormuz and the Bab el-Mandeb Strait remains high, and the uncertainty in crude supply has not been completely eliminated.

For gold, the impact of falling oil prices is two-sided: on one hand, it eased inflation expectations driven by energy, reducing the pressure on the Fed to aggressively hike rates — this is bullish; on the other hand, the drop in oil prices also weakened some safe-haven buying related to geopolitics, coupled with real interest rates remaining high, limiting gold's upside. The market's overall focus has shifted from oil volatility to this Wednesday's FOMC meeting.

III. FOMC Preview: Interest Rate Path Remains Core Variable

The Federal Reserve will announce its interest rate decision this Wednesday, followed by a press conference from Fed Chair Kevin Warsh. CME FedWatch data shows the market is pricing a 33% probability of a 25-basis-point rate hike in July and about an 80% probability of a further rate hike in September. The long-term real yield has risen to around 2.4%, close to highs since October 2023, increasing the opportunity cost of holding gold.

Aakash Doshi, Head of Gold Strategy at State Street Global Advisors, said in an interview that the market has priced in the Fed's hawkish stance too aggressively. He pointed out that real interest rates have risen significantly, and the Fed has conditions to stay put this year, with hawkish expectations having peaked. Doshi reiterated his base case: gold will trade in the $4,750-$5,500/oz range over the next 6 to 9 months. If rate expectations shift, pushing the 2-year U.S. Treasury yield below 4%, gold could rise to $4,500-$4,750 by the end of the year. He believes the July nonfarm payrolls report will be the key catalyst for this shift — only 57,000 jobs were added in June, and if July data disappoints again, the market may quickly reprice rate hike expectations for the end of the year.

IV. Central Bank Dynamics: Chinese Demand Reshapes Global Gold Landscape

BMO Capital Markets noted in a recent report that China's influence in the global gold market far exceeds many investors' perceptions. BMO analysts estimate that China has accumulated approximately 30,000 tonnes of above-ground gold (higher than official statistics) and now drives about one-third of global demand flows. Among this, the People's Bank of China holds about 5,200 tonnes, with the rest being jewelry and investment bars. China's total gold reserves account for about 13% of the global above-ground gold supply, approaching the US' 15%.

BMO believes that at the current pace of buying, the PBOC could reach the current level of US gold reserves in five years. If based on the proportion of M2 money supply (the Fed's gold reserves account for about 5% of US M2), the PBOC would need to hold about 18,000 tonnes of gold, indicating huge room for growth compared to about 5,222 tonnes at the end of last year. China's recent actions also confirm this trend: the central bank bought 15 tonnes of gold in June, the largest monthly purchase since October 2023; at the same time, Beijing is expanding Hong Kong's role as an international gold hub, attracting more international trading activity through new clearing and settlement infrastructure and links with the Shanghai Gold Exchange, gradually shifting global gold pricing power to the East.

V. U.S. Economic Data: Weak Manufacturing Limits Rate Hike Space

The US Commerce Department's June durable goods orders data missed expectations, reinforcing the narrative of an economic slowdown. Data showed that durable goods orders rose 0.3% month-over-month in June (well below the expected 1.6%), with the prior month revised down to -4.0%. Core durable goods orders excluding transportation rose 0.6% month-over-month (below the expected 0.9%).

Analysts pointed out that the slowdown in manufacturing activity indicates that the Fed will find it more difficult to raise rates despite lingering inflation pressures. This provides medium- to long-term support for gold — once the market confirms that the Fed will pause rate hikes after July, gold prices are likely to attract new buying interest.

VI. Institutional Views Roundup

VII. Key Events to Watch (July 28)

• FOMC Interest Rate Decision (2:00 AM Beijing Time Thursday): The Fed releases its interest rate decision and policy statement, followed by a press conference from Fed Chair Kevin Warsh. Focus on the dot plot and Warsh's comments on inflation and the rate path.
• US June PCE Price Index (Thursday): The Fed's preferred inflation gauge; the market is watching for signs of a slowdown.
• US Q2 GDP Advance Estimate (Thursday): US second-quarter GDP data to assess the level of recession risk.
• US-Iran Situation and Strait of Hormuz: Whether the ceasefire is sustainable; progress in restoring shipping lanes directly impacts the crude oil premium and inflation expectations.
• Key Technical Levels: Whether spot gold can break through resistance at $4,166 and whether it can hold support at $4,072.

Disclaimer: This material is provided by Delta Horizon Capital（德合资本） and is for institutional investor reference only. It does not constitute any express or implied investment advice, offer, or solicitation. The data and information contained in this report are derived from public market sources. Delta Horizon Capital（德合资本） makes no warranty as to its accuracy or completeness. Past performance is not indicative of future results. Market risks exist, and investment should be made with caution.

Delta Horizon Capital（德合资本） is a quantitative trading firm headquartered in Hong Kong, with technology and research teams based in North America. It specializes in quantitative trading, two-way quoting, and market liquidity provision. The company has long been deeply involved in diversified markets including precious metals, stock index futures, foreign exchange and interest rates, energy, and commodities. Leveraging mature quantitative pricing models, a rigorous risk management system, and low-latency trading infrastructure, it provides stable, efficient, and flexible liquidity services to institutional clients. Core team members have a combined experience of over 30 years in international futures, options, and derivatives markets. Since 2017, the Delta Horizon Capital trading team has successively obtained on-exchange market making qualifications for the first batch of non-ferrous metals, gold futures, A50 stock index futures, and RMB currency futures at the Hong Kong Exchange, and has won several awards from HKEX for market making and liquidity provision. Delta Horizon Capital (Hong Kong) Limited is currently listed on the HKEX's list of liquidity providers for USD Gold Futures (GDU). For more details, please visit the official website: www.deltahorizoncapital.com