Gold Rally Resumes on Cooling CPI and Rising Geopolitical Tensions

1. CPI Undershoots Expectations: Energy Prices Lead Inflation Slowdown

U.S. CPI data for May came in below market expectations across the board, with both YoY and MoM inflation rates declining—marking a temporary easing of inflationary pressure. The primary driver was falling energy prices, with declines also seen in goods like automobiles and apparel. However, tariff-sensitive categories such as toys and home appliances recorded price increases, suggesting that import cost pressures are still brewing.

Traders have sharply revised up expectations for Fed rate cuts, with markets now pricing in two rate cuts this year and assigning a 75% probability to a cut before September. As a result, U.S. Treasury prices rose, yields fell, and the U.S. Dollar Index weakened rapidly. Gold broke above technical resistance and resumed its push toward the $3,400/oz level.

2. Consumers Yet to Feel Full Impact of Tariffs

Although the Trump administration has revived tariff actions, data suggests that the price impact has not yet fully reached consumers. Part of this is due to delayed implementation of the tariffs, and part reflects firms absorbing costs instead of passing them on.

[U.S. Savings Rate Remains Depressed – Source: Bloomberg]

However, should tariffs escalate further and start feeding through to retail prices, inflationary risks may re-emerge. U.S. consumer resilience is already under pressure, with inflation expectations climbing. Recent data shows 52% of Americans are unable to cover a $2,000 emergency expense, and 31% cannot handle a $500 financial shock. Household finances remain fragile. According to Bloomberg‘s latest survey, 37% of respondents consider inflation to be their top financial concern for 2025—higher than in 2023 or 2022. This persistent fear of inflation will likely reinforce gold’s appeal as a strategic asset, especially in an environment of low savings rates and suppressed real interest rates.

3. Geopolitical Tensions in the Middle East Fuel Safe-Haven Demand

President Trump confirmed on Wednesday night that U.S. troops are being withdrawn from certain Middle Eastern regions, sparking concerns over potential military confrontation with Iran. With the nuclear deal talks nearing their two-month deadline and showing little progress, fears of a breakdown are rising. Should negotiations collapse, geopolitical risk sentiment could surge, positioning gold as the preferred global safe-haven asset.

4. Strong U.S. Treasury Auction Supports Gold Inflows

Amid a surge in global bond supply and rising refinancing risks, this week‘s 10-year U.S. Treasury auction saw solid demand, reflecting heightened appetite for safe assets. Following the results, Treasury yields dropped significantly, further boosting gold’s attractiveness.

Conclusion

In the current macro environment, gold is benefiting from a confluence of bullish drivers: easing inflation, rising rate cut expectations, intensifying geopolitical risks, strong Treasuries, and a weakening dollar. With a confirmed breakout on the technical chart, gold appears poised to challenge the historical $3,400 level. Should geopolitical tensions escalate or tariffs reignite inflation concerns, a new medium-term bull cycle in gold may be underway.

Gold Price Technical Outlook

• After breaking above the $3,363 resistance, the bullish momentum remains intact, suggesting continued buying strength.

• RSI is approaching the overbought threshold of 70, indicating short-term correction risk, yet the upward trend remains intact.

• Immediate resistance lies at the $3,400 round number. A breakout could open the door to higher price ranges.

• Strategy: Maintain a bullish bias. Consider entering long positions on pullbacks near $3,360 with stop-loss below $3,335.

• Short-term target: $3,390–$3,400 range.

Resistance: $3,400/oz Support: $3,300 and $3,363/oz

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