After the July FOMC meeting, the precious metals market displayed a typical pattern of "bearish news priced in but upside limited," resulting in a pressured and consolidating environment. The performance of the Fed Chair was not fully aligned with market expectations, as he took a less common path. Combined with the current opacity surrounding the Fed's structural reforms regarding his true intentions, this provided the Chair with strategic room to hold steady, significantly reducing the predictability of the policy path.

Following the meeting, a decline in short-term US Treasury yields briefly offered a relief rally for gold prices. However, long-term rates surged to multi-year highs, with the yield curve steepening to reflect market concerns over the US fiscal deficit and long-term inflation. Gold's safe-haven appeal has temporarily ceded to interest rate pricing logic, continually capping upward price potential. Concurrently, Shanghai gold and Shanghai silver are consolidating within a narrowing symmetrical triangle, with volatility indices converging. In terms of trading logic, the market is currently pricing around the chain of "inflation stickiness – high-rate maintenance – fluctuating rate hike expectations." Combined with adjustments to inflation expectations due to the fluctuating situation in the Middle East, precious metals are unlikely to form a trend-based breakout. A range-bound approach is advisable, with caution on rallies and strategic positioning on dips, while closely monitoring subsequent inflation data and developments in the Middle East for their marginal impact on rate expectations. This content is for reference only.

Market Review

Looking at precious metals with smaller circulating volumes, such as silver, platinum, and palladium, although they have not returned to an uptrend and silver prices have not yet reclaimed half of their previous highs on both the COMEX and SHFE, their price action has shown clear signs of bottoming. Notably, these three metals, similar to gold, are currently forming a symmetrical triangle pattern, with the VIX for Shanghai gold and silver simultaneously decreasing. The bottoming signals from non-gold precious metals have notably influenced the stock prices of several A-share non-ferrous metal companies. Considering the current gold-to-silver ratio, it has not yet broken away from its upward correction trend, and last week, the COMEX gold-to-silver ratio tested its previous highs. While market explanations vary, with many traders attributing this to a slower-than-expected recovery in downstream industrial demand from sectors like photovoltaics and electronics, visible inventory levels across the whole market on both COMEX and SHFE are rising, indicating insufficient supply-demand support. This leads us to believe that the current gold-to-silver ratio suggests two possible market scenarios: First, the gold-to-silver ratio continues to decline, with capital continuing to treat silver as a call option-like instrument on gold, ultimately dragging gold down and breaking its current plateau. Second, after the initial speculative rally in precious metals, the overall social inventory of silver, impacted by reduced speculative demand, sees a clear inflection point, with the market shifting focus to speculative trading in platinum and palladium, which were not fully exploited in the last cycle, as gold-like call options. After platinum and palladium bottom, gold is likely to continue consolidating in its current range.

September Rate Hike Expectations Revised Down Post-FOMC; Long-Term Bond Yields Surge

According to the latest data from the CME FedWatch Tool as of August 3rd, the probability of a 25 basis point rate hike in September is 64.71%, while the probability of maintaining rates is 35.29%. Compared to before the July 27th FOMC meeting, the hawkish pressure on a September rate hike has somewhat eased, influenced by the Fed Chair's language and the updated dot plot. The FOMC decision on July 29th kept the federal funds rate target range unchanged at 3.50%–3.75%, marking the fifth consecutive hold since 2026. The vote was 9 in favor of holding rates, with 3 dissenting in favor of a 25bp hike. This is the first time since September 2016 that three voting members have cast dissenting votes on the same side. "New Fed Whisperer" Nick Timiraos noted this reflects growing divergence within the committee regarding inflation risks. In his press conference, the Fed Chair maintained a neutral-to-hawkish tone, reiterating the 2% inflation target as non-negotiable and stating "there is no soft inflation target, absolutely not possible." He emphasized that a single favorable inflation data point is insufficient to confirm a downward trend. He also disagreed with characterizing the decision as a "pause," calling it "just the beginning of the story, not the end," and reserved the option for further rate hikes. The Chair also stated that financial markets have done most of the tightening work since the June meeting and that the Fed will try to avoid intervening in market pricing through forward guidance. The reaction of the dollar and US Treasuries following the FOMC meeting is noteworthy. The US Dollar Index continued to decline during the Fed Chair's press conference, falling below the 100 mark, as the market interpreted the decision as "less hawkish than the dissenting votes suggested." The 2-year US Treasury yield fell 7 basis points to a fresh session low of 4.2171%, and spot gold temporarily rose over 2%. However, long-term yields surged significantly. The 10-year US Treasury yield rose 7.1 bps to 4.679%, while the 30-year US Treasury yield skyrocketed 11.1 bps to 5.204%, breaking above 5.2% for the first time since 2007. Institutions like CICC interpret this as the Fed Chair "outsourcing part of the tightening function to the market." Bond market "vigilantes" are using a "buy short, sell long" trade structure to express waning patience with the Fed's policy credibility and a repricing of long-term US solvency risks, driving a relentless bear market in long-term bonds. The 30-year US Treasury yield decisively broke out, reaching levels not seen since before the pre-GFC era.

Domestically, on August 1st, Industrial and Commercial Bank of China (ICBC) listed its 2026 first and second tranches of 5-year personal certificates of deposit (CDs) with annualized rates of 1.60% and 1.55%, respectively, requiring a minimum deposit of 200,000 RMB, supporting partial early withdrawal and transfer. With ICBC joining, the four major state-owned banks (ICBC, Agricultural Bank of China, Bank of China, China Construction Bank) have all relisted 5-year CD products, with the maximum annualized rate being 1.6%. This marks a periodic restart of long-term deposit products by major state-owned banks under pressure from narrowing net interest margins and liability management needs. Amidst the unclear forward guidance from the Fed and the Chair's inclination to reduce the number of FOMC meetings (potentially from 8 to the statutory minimum of 4), the uncertainty of global monetary policy paths has increased. Using China's current market as an anchor, the pioneering restart of long-term deposit products by major state-owned banks may signal that before the Fed acts, central banks and commercial banks in various countries will proactively implement corresponding tightening or liability management measures based on their own fundamentals.

Limited Progress in US-Iran Negotiations; Crude Oil Struggles to Shed All Risk Premium

Starting over the weekend, the US side quickly released de-escalatory signals. On August 2nd, Jinshi Data reported that US President Donald Trump posted on social media, stating, "The United States is ready to confront Iran with a level of military deterrence, strength, and power not seen since World War II. Nevertheless, we have just received requests from Iran and other Middle Eastern countries to postpone any attack because a framework for an agreement has been reached. This will include the immediate, complete, and total opening of the Strait of Hormuz, and an end to Iran's nuclear threat. Based on this request, I agree to cancel the attack for the sake of the world's future interests and the survival of a successful and prosperous Iran, provided an agreement can be reached quickly. Israel is committed to this with me. Everyone, get moving and get this done." Iran denied the US stance, indicating the two sides remain in a state of stalemate. Iran's Fars News Agency reported on the 2nd, citing a source, that the plan to reopen the Strait of Hormuz is a pure rumor. A relevant source stated that no agreement has been reached to reopen the Strait of Hormuz, and reports on the matter are completely false. Another informed military source emphasized that as long as the US continues its hostile actions, the Strait of Hormuz will remain closed, with ships only able to use announced routes and must obtain permission from the Islamic Revolutionary Guard Corps Navy. Regardless of Iran's stance, after the US extended an olive branch, the narrative of negotiations has clearly begun to emerge. Future market trading will primarily revolve around the progress of talks between the two sides. During this process, the market is likely to continue trading based on verifiable physical flows. Overall, the market is more focused on whether the Strait truly affects oil outflows, whether commercial ships continue to reroute, and whether refineries and the spot market show signs of strain. We currently lean towards the Revolutionary Guard still maintaining significant control over the Strait, making it difficult for crude oil to shed all its risk premium.

Summary

Last week, the precious metals market continued its consolidating trend, with the center of gravity slightly rising. COMEX gold recorded a modest weekly gain, briefly spiking intraday on Trump's comments regarding the Iran situation before paring gains to close higher. Silver, platinum, palladium, and other smaller metals, while not returning to their previous highs, have shown signs of bottoming, with market volatility simultaneously declining. The gold-to-silver ratio remains in a relatively strong range, leading to two possible scenarios: First, if capital continues to treat silver as a "call option-like" instrument on gold, its weakness could drag gold down and break its existing plateau. Second, as speculative enthusiasm wanes, market focus may shift to platinum and palladium, which were not fully exploited in the last cycle, with gold likely maintaining a range-bound consolidation. The sluggish recovery in industrial demand and the accumulation of visible inventory are the real-world pressures suppressing silver prices. On the macro front, the Fed held rates as expected, but internal divisions intensified, with several officials dissenting in favor of a rate hike. Although the Fed Chair firmly defended the inflation target and refused to define the decision as a "pause," the market interpreted it as less hawkish than expected, causing the US dollar to fall. Notably, long-term US Treasury yields surged abnormally, with the 30-year bond hitting multi-year highs, reflecting growing market concerns about the long-term US fiscal situation, with the bond market spontaneously assuming some tightening functions. Domestically, major state-owned banks collectively restarted issuing long-term CDs, reflecting that under the pressure of narrowing net interest margins, commercial banks are actively adjusting their liability structures to cope with the changing environment. Regarding geopolitics, the US unilaterally signaled a preliminary agreement with Iran, but Iran denied this, with the back-and-forth statements casting a shadow over the prospects for negotiations. As a result, crude oil prices have shed some risk premium. However, considering the actual control of the Strait of Hormuz and persistent shipping disruptions, it is difficult for oil prices to experience a sharp decline. In summary, precious metals are expected to continue their platform consolidation in the short term. The uncertainty of monetary policy and the lingering effects of Middle Eastern geopolitical games will be the core variables driving future market volatility. We believe a turning point is still in the gestation phase, and we advise short- to medium-term traders to reduce betting on directional moves. This content is for reference only.