Colin Cieszynski, chief strategist at SIA Wealth Management, believes that due to the impact of the US-Iran conflict on energy prices and uncertainty surrounding the inflation outlook, Federal Reserve Chairman Warsh is inclined to maintain the current policy unchanged this summer, with major policy adjustments postponed until the September FOMC meeting at the earliest. Against this backdrop, gold lacks short-term trend drivers and is likely to continue trading within a range, with the consolidation period potentially lasting 3 to 6 months. The gold price is currently trading between previous highs and lows, with the short-term trading range locked at $3960 to $4170 per ounce. This week's Fed decision is unlikely to trigger a significant breakout, and a clear trend will require waiting for the key window in September.

Macroeconomic Logic: The Fed's decision to remain on hold during the summer suggests a policy turning point in September.

Warsh has made it clear that he plans to wait for the internal task force to complete its research and will not implement any major interest rate adjustments in the short term. The Fed currently needs time to verify whether the June inflation decline was a one-off fluctuation or a continued downward trend. Strategists believe that the Fed will try to postpone its policy decision until September. On the one hand, the September meeting will simultaneously update the dot plot of economic projections; on the other hand, with the midterm elections approaching, the policy operation space at the October FOMC meeting will be limited. Even if there are internal disagreements, the Fed will try to avoid triggering sharp market fluctuations during the summer.

A complex interplay of inflation and exchange rate fluctuations, with bullish and bearish factors weighing on gold prices.

The market has partially priced in the safe-haven premium from the US-Iran conflict, with gold prices retreating sharply from $5,500 to around $4,000. However, geopolitical risks have not been completely eliminated. Meanwhile, potential risks remain: inflation data has a lagging effect; if oil prices continue to rise, inflation may rebound in the next one to two months, potentially boosting the dollar and putting downward pressure on gold. Gold is currently at a turning point, far from previous highs and lows, with bullish and bearish forces tending to be balanced, making it difficult to immediately initiate a new one-sided trend.

Short-term market forecast: Gold prices will remain range-bound, with the interest rate meeting unlikely to break the deadlock.

This week's FOMC decision is unlikely to produce any unexpected policy changes, making it difficult to drive gold prices higher. The short-term trading range for gold is expected to be between $3960 and $4170. With the summer trading lull and a large number of corporate earnings reports being released, market sentiment is cautious. Until macroeconomic clues become clearer, gold is likely to enter a consolidation phase, and the sideways trading pattern is probable.

Summarize

In summary, the Federal Reserve maintained a wait-and-see approach during the summer, postponing key decisions until September. Uncertainty persists regarding the inflation outlook and the Middle East geopolitical situation, posing a potential upside risk to the US dollar, resulting in a balance between bullish and bearish factors for gold. In the short term, gold prices are confined to a range of $3960-$4170, and this interest rate meeting is unlikely to be a catalyst for a breakout. Gold is likely to continue consolidating for 3 to 6 months, and a new trend will require a clear policy signal from the Fed meeting in September. Spot gold daily chart source: FX678. At 10:12 AM Beijing time on July 29th, spot gold was trading at $4027.60 per ounce.