Geopolitical De-escalation Reduces Safe-Haven Demand

Reports of a diplomatic deal between the US and Iran concerning the Strait of Hormuz and nuclear weapons have spurred risk-on sentiment across financial markets. This easing of geopolitical tensions in the Middle East typically reduces the appeal of traditional safe-haven assets like gold. The developments contributed to a cautious tone in oil markets and shifts in currency valuations as investors tempered expectations of a wider conflict.

Mixed Economic Signals from China

Recent data from China painted a mixed economic picture, with an acceleration in May's industrial output but an unexpected year-over-year decline in retail sales. As China is a key driver of global commodity consumption, the contraction in consumer spending could suggest headwinds for gold demand, while the industrial figures are more pertinent for silver's use in manufacturing. The disappointing retail data weighed on the currencies of economies with close trade ties to China, such as Australia and New Zealand.

Central Bank Policy in Focus

Global markets are closely watching major central banks, with the Bank of Japan hiking its interest rate by 25 basis points to a 31-year high, a move that was largely anticipated and caused fluctuations in the yen. Attention is now turning to the US Federal Reserve's upcoming monetary policy meeting, leading to a firmer US Dollar as traders await clarity. The direction of the US Dollar and interest rates are critical drivers for precious metals, as they affect the opportunity cost of holding non-yielding assets like gold and silver.