Four consecutive weeks of red on gold. Oil has dropped over thirty percent since late May. And late Sunday night, the US and Iran finally agreed to stop shooting at each other long enough to schedule a meeting in Doha.
Welcome to the kind of week where everything looks like it moved, and yet nothing feels resolved. With fragile peace on a wire's edge, traders are nervous and rightfully so. Will this peace last? Is this just a stall tactic for further military buildup? The short answer is nobody really knows outside of the oval office so the broken record continues with the wait and see approach. Let me break it down.
Gold: The Fourth Week Down
Gold closed the week around $4,040, down roughly three percent for the five sessions. That makes four consecutive weekly losses for the metal, a run that has taken it down more than ten percent for the month of June alone.
The culprit is the same one it has been for weeks: the dollar and the rate narrative. Warsh reaffirmed his hawkish stance at every opportunity this week, and the PCE inflation report that dropped Friday came broadly in line with expectations at 4.1 percent headline. Markets had been hoping for a miss that would cool the Fed's appetite for further tightening. They did not get one. Markets are now pricing three Federal Reserve rate hikes this year, with September carrying around a sixty percent probability.
In a high rate environment, gold yields nothing. Which is why every time Warsh opens his mouth and the market decides he means it, gold slides. The metal has now given back a significant portion of its January all time high near $5,589. The structural bull case, central bank accumulation, dollar erosion, long term inflationary pressure, remains intact. The near term picture is being beaten down by yield reality.
What to watch: $4,000 is the psychological floor everyone is talking about. A clean close below it on a weekly basis changes the conversation significantly. For now, that level has been held on every test. But four down weeks in a row with a hawkish Fed and softening geopolitical risk premium is not a friendly setup.
Oil: The Story Nobody Saw Coming
WTI crude spent most of this week around $69.65 per barrel. To put that in context, oil was above $100 when the US-Iran conflict erupted in late February. The partial reopening of the Strait of Hormuz has reversed months of geopolitical premium in a matter of weeks, and the market is now pricing a world where supply recovers faster than demand catches up.
This is the move traders had been waiting for since the ceasefire rumours started in May, and when it came, it came fast and hard. More than thirty percent off the highs since late May. So it seems that the market is beginning to accept the possible peace as truth this time. Time will tell and more ominously, bombs.
The downstream effects are meaningful. Lower oil means lower energy inflation. Lower energy inflation gives the Fed marginally more room. Which is why the dollar did not rip as hard on the PCE print as some expected, and gold managed a small bounce into Friday's close. The market is trying to square a circle: hawkish Fed, declining inflation inputs, and a geopolitical situation that is still officially unresolved.
Forex: The Dollar Holds, Nothing Breaks
EUR/USD spent the week around 1.1390, capped at 1.1400 on every rally attempt. The ECB hiked its deposit rate to 2.25 percent earlier in June, its first hike since 2023, as eurozone headline inflation rose to 3.2 percent. A more hawkish ECB should help the euro, and it has, limiting the downside. But it is not enough to generate a sustained move higher against a dollar still supported by three expected Fed hikes.
GBP/USD was trading around 1.33, hemmed in by the same USD ceiling. The Bank of England held at 3.75 percent with services inflation sticky at 3.7 percent. Sterling has its own inflation problem and its own central bank navigating the same narrow corridor: tight enough to keep inflation credibility, not so tight it chokes a fragile economy.
USD/JPY pushed back toward 160, the level the Ministry of Finance has previously described as a line in the sand. The Bank of Japan raised rates again in June as it continues to normalise, but the yen remains weak because the differential with US rates is still enormous. Every time USD/JPY approaches 160, the question is whether Tokyo blinks. So far they have not had to. But that level is not a random number.
The Peace Talks: Handle With Care
Late on June 28, a US official confirmed that both sides had agreed to halt tit-for-tat attacks and that vessels could move freely through the Strait of Hormuz. Talks are set to continue in Doha on June 30. This followed a week of back and forth that included Iranian strikes on US military facilities in Kuwait and Bahrain, retaliatory US strikes, and then a late Sunday agreement to stand down.
The 14-point MOU that Trump and Iranian President Pezeshkian signed in early June gave both sides 60 days to negotiate a final agreement. That clock is ticking. The Doha talks this Monday are described as technical level meetings, not a signing ceremony.
The market is treating this cautiously, and correctly so. Oil fell hard on the ceasefire news, but gold recovered modestly, and the dollar has not given up its gains. When the market truly believes the war risk is behind us, you will see it in a sustained oil slide below $65, a meaningful dollar pullback, and gold catching a bid on the rate narrative shifting. We are not there yet.
The peace talks are real. The resolution is not locked in. Trade accordingly.
The Week in Summary
Gold down three percent for the week, down ten percent for June. Oil in a multi-week freefall on Hormuz reopening expectations. Dollar firm. EUR/USD capped at 1.14. GBP/USD holding 1.33. USD/JPY knocking on 160 again. PCE in line, no surprises, rate hike path unchanged. And a ceasefire in the Gulf that the market believes enough to sell oil on, but not enough to buy gold or sell the dollar on.
That is the scorecard. Ambiguous on the surface, but actually quite readable if you know what the market is pricing versus what it is still waiting to see confirmed.
Monday brings the Doha talks, ISM Manufacturing, and the start of a week that ends with June NFP. Heavy calendar. The kind of week where you want your levels set before Sunday night, not scrambled for on Monday morning. Good luck everyone and be careful.