Last week, precious metals generally experienced a pullback followed by a rebound, with the market primarily driven by Warsh's hawkish remarks at the Jackson Hole symposium, resulting in a clear bearish trend. The subsequent soft ADP employment data triggered a short-term rebound in precious metals, which was then followed by a modest surge and retreat on the back of the non-farm payrolls release. During this period, rate hike pressure escalated significantly, with CME interest rate swap data showing a sharp increase in trader expectations for a rate hike at the September 16 FOMC meeting.
Given the actual duration of past Fed tightening cycles, rate hike expectations serve as short-term pressure that could be interpreted as either "selling the news" or the beginning of a sustained downtrend. The market is clearly showing divergent pricing on this matter. On the external front, Trump continues to attempt to address the dampening effect of high oil prices on economic confidence and their amplifying effect on rate hike pressures. Based on the current situation, Trump's actions may partially eliminate the risk premium in the crude oil market; however, with supply and demand being materially impacted, oil prices are unlikely to fully correct. Additionally, US-Iran relations have significantly affected Republican prospects in the midterm elections. Polymarket currently indicates that the market views a Democratic sweep of both chambers of Congress as the most likely outcome. Long-term capital in the tech sector and precious metals may undergo substantial repositioning in response to potential shifts in the US political landscape, leading us to believe that the market may continue to consolidate amidst deleveraging in the medium term.
Gold demand remains relatively solid at present. Last week saw multiple countries directly redeem gold reserves from the US or repatriate shipments, indicating that from the perspective of various central banks, US Treasury issues warrant caution. Diversifying asset allocation and achieving relatively stable returns remains the primary theme for precious metals investment in this cycle. In base metals, supply-demand gaps continue to persist due to notable disruptions at copper and other mine sites. The silver supply outlook is becoming increasingly uncertain. Combined with its industrial metal performance and previous short-squeeze episodes, we believe bullish sentiment for silver is strong. Furthermore, for platinum and palladium—metals whose supply is highly susceptible to disruption—bullish sentiment may be stronger than for gold, which has more stable supply dynamics.
We believe that short-term speculation over the rate hike/cut cycle is nearing a standoff. Treasury yield pressures, the Fed's current hawkish stance, and fluctuations in non-farm payroll data all make it more difficult for a new major upward wave to begin in the near term. There is no shortage of bottom-fishing capital in the market, but caution is warranted when approaching the precious metals complex at this time, with attention to the fact that non-gold precious metals may be more influenced by their own supply-demand fundamentals. This is for reference only.
Market Review
Looking at the August to early September period, the unexpected negative reading in July non-farm payrolls (-23,000) in early August quickly cooled rate hike expectations, leading to a pullback in the dollar and Treasury yields. Gold rebounded from below the $4,150 level, breaking through key resistance at $4,200 and $4,400 with two strong bullish candlesticks. In mid-to-late August, as US inflation moderated and the Treasury announced an expansion of its long-dated bond buyback program, the "dollar credit and fiscal sustainability" trade gained traction, accelerating gold's advance. During the week of August 24, spot gold tested the $4,696 level, approaching the psychological $4,700 mark.
On August 28, Warsh's hawkish Jackson Hole remarks caused the COMEX gold December contract to plunge 3.24% that day, with the weekly decline reaching 3.38%, ending a three-week winning streak. Early September shifted to a tug-of-war between bulls and bears: US-Iran strikes at the start of the week boosted safe-haven buying, with the COMEX gold December contract dipping to $4,329.2 before reclaiming $4,500 within 24 hours. This coincided with Waller's September 3 comment about "conditionally holding steady," which pushed yields lower and gold higher. On September 4, the August non-farm payrolls figure vastly exceeded expectations, causing the COMEX gold December contract to form a wide-ranging doji candlestick on the weekly chart, highlighting significantly heightened divergence between bulls and bears at elevated levels.
Currently, for bullish traders, the movements of silver, platinum, and palladium deserve greater attention. Silver continues to exhibit high volatility and high beta characteristics, outperforming gold in August. Following the weak jobs data at the month's start, the COMEX silver September contract rallied in tandem with gold. During this period, the London market saw a spot premium of $2.88 per ounce on August 7. On August 28, when Warsh turned hawkish, the COMEX silver December contract plunged 4.25%, retreating from the $72 level. In early September, silver fell first and then recovered: the COMEX silver December contract followed the complex down to $63.880 before gradually reclaiming ground on industrial metal strength and dip-buying support, closing the week at $66.820 with a doji-like bullish candle on the weekly chart. The gold/silver ratio eased slightly from its highs.
Platinum and palladium have shown more independent action relative to gold, with palladium exhibiting the strongest rebound trend. Platinum staged an independent rally in mid-to-late August, with the NYMEX October contract rising 7.66% during the week through August 21. Following the Warsh hawkish shock on August 28, platinum plunged alongside gold and silver, but subsequently demonstrated relative resilience in early September, closing the week at $1,828.5 with a pronounced lower shadow on the weekly chart, significantly outperforming gold, silver, and palladium. Palladium shows stronger rebound momentum in the short-to-medium term, with its weekly chart displaying bullish alignment—meaning the week's low was notably higher than the prior week's low. During the week of August 28, the NYMEX front-month contract closed at $1,446.0, surging 5.43%, in stark contrast to the collective sell-off in gold, silver, and platinum. In early September, palladium posted the highest volatility in the complex: the strong payrolls data and profit-taking pushed it to close at $1,400, down 3.18% on the week, with weekly trading range exceeding 10%. Technically, palladium faces confluence resistance from the annual, monthly, and quarterly moving averages, which may lead to intense bull-bear battles—we will not elaborate further here.
Inflation Data Takes Center Stage Ahead of FOMC
Prior to the September FOMC meeting (September 15-16, with the decision due at 2:00 AM Beijing time on the 17th alongside the latest dot plot), the August CPI report (released at 8:30 PM on the 11th, with PPI released one day earlier on the 10th) is the final inflation data point before the meeting, arriving just five days before the decision. With August non-farm payrolls already in the books and vastly exceeding expectations (162,000 new jobs added versus ~55,000 expected; unemployment rate at 4.1%; prior two months revised up by a combined 55,000), the employment side can no longer justify a "wait-and-see" stance. Inflation is now the sole unresolved variable. Consensus expectations for August CPI point to +0.4% month-over-month on headline and +0.2% on core (with year-over-year core around 3.4%, flat versus July).
For this CPI forecast, divergence among investment banks is notably rare. Bank of America expects core CPI at +0.22% month-over-month (year-over-year rising to 3.4%), which it believes would support a rate hike and maintains its September hike call. Citi projects core at just +0.184% month-over-month (year-over-year falling to 2.3%, the lowest since April 2021), which it argues supports holding rates steady. Goldman Sachs expects core around +0.2%, with a base case of no hike, viewing the market's near-60% probability of a hike as overpriced. The underlying reason for this divergence is conflicting indicators: the Cleveland Fed's nowcast shows core CPI year-over-year trending down toward 2.3%, but core PCE year-over-year is heading toward 3.5%, with super-core PCE already at 3.9%. Since PCE is the Fed's preferred gauge—even if CPI is moderate, the Fed's inflation narrative could remain hawkish.
The Fed has now held rates steady for five consecutive meetings. A September resumption of hikes would confirm a new tightening cycle—this represents the "beginning of the bad news." If core CPI rounds to 0.2% month-over-month, the September hike risk would be largely cleared, corresponding to "bad news out of the way." Notably, the Fed will not have its preferred inflation reading available at this meeting—the September 16 FOMC decision comes roughly two weeks before the next PCE release. Citi also notes that this August PCE will incorporate methodological adjustments and historical data revisions (which could revise core PCE year-over-year down about 30 basis points to 3.0%), making interpretation noisier than usual. The market can only trade based on CPI expectations for now.
US Debt Concerns Persist, Supporting Gold's Long-Term Investment Case
Total US Treasury debt has surpassed $40 trillion. The 10-year yield sits near 4.8% (highest since 2008), while the 30-year is at 5.31% (highest since 2007), with global bond markets under synchronized pressure. The US Treasury this week launched a "doubled" bond repurchase program aimed at suppressing long-end yields—the buyback itself is an official acknowledgment of pressure in the Treasury market. Central bank gold purchases and reserve repatriation provide the most direct evidence of the long-term investment thesis. Global central banks have been net buyers of gold for 16 consecutive years, with purchases exceeding 1,000 tonnes annually from 2022-2024 and reaching 863 tonnes in 2025—still well above the average annual pace of approximately 473 tonnes from 2010-2021.
Reserve location adjustments added another case last week: on September 2, the Dutch central bank announced it had transferred approximately 86 tonnes of gold from New York and Ottawa to London between March and August this year, reducing the share stored in New York from 31.3% to 18.5%. France previously completed the transfer of its final 129 tonnes of gold held in New York, bringing all 2,437 tonnes of its reserves onshore. The rising trend in central bank gold dependency and the declining reliance on US Treasuries show no signs of reversal at any level. Central bank gold demand remains consistently stable.
Trump's Limited Options on Oil Prices
Currently, the correlation between oil prices and Treasury yields has climbed to historic highs. High oil prices raise market inflation expectations, pushing the Fed toward hikes—directly conflicting with Trump's policy preference for rate cuts. Trump's available policy tools are largely exhausted, and the market clearly perceives the administration's strong intent to suppress oil prices. However, constrained by materially tighter oil supply-demand fundamentals and increasingly severe shipping disruptions in the Strait of Hormuz, we assess that the Trump administration's room to meaningfully influence oil prices is quite limited. Let us review the policy toolkit and the practical limitations of each measure.
First, pressuring domestic energy producers to increase output. The administration has convened meetings with nearly ten energy companies including Chevron, Valero, and Marathon, urging them to expand capacity and build new refineries. However, companies report that new refining projects have weak economic returns and long construction timelines, and with refinery utilization already at 98%, supply bottlenecks are concentrated in refining capacity, which is difficult to overcome in the short term. Second, tapping the Strategic Petroleum Reserve (SPR). US SPR inventories have fallen to 287 million barrels, the lowest since 1982, with approximately 128 million barrels already released during the current crisis, leaving limited remaining drawdown capacity. Third, advancing agreements related to Venezuela. The US could potentially gain access to Venezuela's 65+ billion barrels of crude reserves, targeting 1.5 million barrels per day of production, but this represents long-term potential supply that cannot be realized in the near term. Fourth, diplomatic mediation on Russia-Ukraine. US envoys have visited both Moscow and Kyiv, and Putin issued a three-day ceasefire order, but Russia's diesel export ban remains in effect through the end of September, leaving supply-side constraints unresolved.
Fifth, managing expectations through communication. Treasury Secretary Bessent's suggestion that "oil will fall to $40-50 per barrel after the conflict ends" is essentially a conditional statement aimed at the bond market. $40 is well below the breakeven level of approximately $65 for US shale producers, and mainstream institutions estimate a realistic post-conflict oil price floor in the $55-65 per barrel range. Sixth, using fiscal tools as a hedge. The US launched a doubled-scale Treasury buyback this week, attempting to directly lower interest rates if oil prices cannot be suppressed. But the core variables determining oil prices are not controlled by the White House: first, the pace of US-Iran conflict escalation—on September 5, the two sides again exchanged tanker attacks; second, shipping conditions through the Strait of Hormuz, where daily average crude flows have fallen to approximately 4.9 million barrels in Q2 versus 21.6 million pre-conflict, with Mitsui OSK Lines judging that shipping cannot return to normal before year-end and Lloyd's confirming approximately $1.9 billion in related insurance losses; third, Iran's will to resist—US intelligence assessments believe Iran will maintain its confrontation stance at least through the November midterm elections.
The current US-Iran conflict resembles a political liability for Trump. Polymarket shows the probability of a Democratic sweep of both chambers has risen to 50-51% (from 45% a month ago and just 26% a year ago), with the House probability around 89% and Senate around 51%. Trump's approval rating stands at only 32-40%, significantly below the historical average of 53% for presidents at the equivalent point two years into their term ahead of midterms. Given the rising anti-AI sentiment, we believe that a Democratic sweep or control of even one chamber could have notable implications for the current political landscape, risk assets, and gold prices. Citing Bank of America analysts as an example, they list a "Democratic sweep" as the largest current tail risk: it could lead to significant equity market declines, dollar weakness, and challenges to AI capital expenditure narratives; a Republican sweep would keep the market's risk-appetite green light on; and a divided Congress (the most likely scenario) might produce a "Goldilocks" outcome that is relatively friendly to capital markets.
Due to the existence of tail risks, for precious metals, the expectation of a political transition will drive long-term capital to reallocate between tech and precious metals: uncertainty itself strengthens gold's allocation value, but a "deleveraging" style of capital migration means amplified volatility and difficulty in establishing a sustained upward trend.
Summary and Outlook
Currently, precious metals are in a waiting period following a data vacuum. Short-term speculation between rate hike and cut expectations is nearing a stalemate, long-term trading logic has yet to be rebuilt, and the market is likely to consolidate with declining volatility. The September 11 CPI report is the sole decisive variable before the FOMC meeting. Since August PCE will only be released after the decision, CPI's pricing weight is further elevated. Even if the Fed holds rates steady, the combination of "no hike plus hawkish rhetoric" will still limit rebound potential, and conditions for a new major upward wave are not yet in place. In the long term, with US debt surpassing $40 trillion and the trends of sustained central bank gold purchases and reserve repatriation unchanged, gold's allocation value remains solid. Oil's risk premium is constrained by US-Iran conflict and Hormuz shipping disruptions, making it difficult to fully eliminate, with limited room for substantive Trump administration intervention. The tail risk from the midterm elections may drive long-term capital to deleverage in the precious metals complex, potentially leading to lower volatility and overall downward pressure. Operationally, we recommend a cautious approach to the sector: adopt range-trading strategies for gold and silver, avoiding chasing highs or heavy bottom-fishing; silver, platinum, and palladium have relatively independent supply-demand fundamentals with stronger bullish elasticity, but attention should be paid to palladium's elevated volatility risk amid technical resistance.