Spot Gold Plunges Toward 4,000 Mark as US Strikes Iran Again and Fed Minutes Stir Market.

TradingKey - Macro events boost rate hike expectations; spot gold tests the $4,000 level again; next Tuesday's June CPI release looms as a watershed for bulls and bears.

During the Asian session on July 9, spot gold ( XAUUSD) prices remained weak, fluctuating around $4,000 and temporarily trading at $4,067 per ounce. Yesterday, gold prices plunged by more than 2%, retreating to a low of $4,030 per ounce, just one step away from the key psychological and technical support level.

Gold price chart, Source: TradingKey

This wave of decline in gold has broken the traditional logic of the safe-haven effect of "buying gold during war." It has currently been swallowed by a "massive macro transmission chain": U.S. forces launched a new round of attacks on Iran, driving oil prices to briefly breach $75 per barrel, which reignited market inflation expectations (CPI). This further boosted the probability of Fed rate hikes, leading to a surge in real U.S. Treasury yields and the U.S. Dollar Index, triggering a sell-off in gold.

The recently released minutes of the Federal Reserve meeting also dealt a fatal blow to gold bulls. The minutes clearly pointed out that most officials favored "no longer repeating language that implies an easing of monetary policy," meaning the Fed has officially erased any commitment to future rate cuts from its official statements. Furthermore, 9 out of 17 committee members supported "at least one more rate hike" by the end of the year. Following the release of the minutes, the CME FedWatch Tool showed that the market's implied probability of another rate hike in September rose from 57% to over 63%.

Whether gold can form a double-bottom rebound at $4,000 depends entirely on the upcoming U.S. June CPI data to be released next Tuesday (July 14). If the year-on-year CPI growth can be kept below 3.8%, rate hike expectations will quickly cool, and gold is expected to launch a right-side recovery. If CPI remains above 4.0%, the $4,000 mark will face an extremely severe test of a potential breakdown.