The internal divisions within the Federal Reserve have intensified, with three members supporting an interest rate hike. The probability of raising interest rates in September has exceeded 60%. Gold has plummeted 22% from its high point at the beginning of the year, marking its worst quarter since 2013. The geopolitical conflict in the Middle East has produced a reverse hedging effect, and the diversion of funds from the US dollar has suppressed precious metals. CD Markets believes that the interest rate cut cycle in 2027 is expected. Global de-dollarization and debt risks support the long-term allocation value of gold, and short-term corrections will open a layout window.

Although the Fort Knox gold account is complete, it has been decoupled from the US dollar, and the market's trust in the legal currency system has increased. The petrodollar system is loosening, global de-dollarization is accelerating, and the proportion of U.S. dollar reserves has dropped to 57%, a 25-year low. Short-term interest rates suppress gold prices, and the weakening of long-term U.S. dollar credit supports the revaluation of gold as an asset without sovereign credit risk.

The escalation of geopolitical conflicts in the Middle East has pushed up oil price risks. Navigation in the Strait of Hormuz is less than 45% of the pre-war level. Goldman Sachs’ extreme scenario sees Brent reaching US$120 in the fourth quarter. European diesel stocks have bottomed out, and refining bottlenecks have become a core constraint. The energy rebound has pushed up global inflation, the Federal Reserve's hawkish tone has strengthened, and interest rate cut expectations have been postponed.

In May, 172,000 new non-farm jobs were added, exceeding expectations. Employment growth in the past three months hit a new high in more than two years, and the unemployment rate remained at 4.3%. The hawkish camp within the Federal Reserve has grown, and the market has fully priced in an interest rate hike within the year, with the probability of a December rate hike soaring. Warsh is facing a big test for the first time. There is a high probability that the June meeting will remain unchanged but his words will be hawkish, retaining the option of raising interest rates. Gold plummeted nearly $100, and U.S. bond yields rose across the board.

The U.S.-Iran conflict has fallen into a dual dilemma of military stalemate and political constraints. The traffic volume in the Strait of Hormuz is only 10% of the pre-war level. The prolonged closure period has pushed up the probability of oil prices reaching a new high this summer with more than 70%. The consensus on the civil war in the United States collapsed, and more than 60% of the public opposed the indefinite war. Trump was in a dilemma. Energy shocks will strengthen the stickiness of inflation, suppress risky assets, and continue to benefit the safe-haven allocation of gold.