[Market Review]

1. Gold and Silver Market: Last Friday, gold and silver performed strongly, with London gold ultimately rising by 1.83%, closing at $5279.95 per ounce; London silver surged, crossing the $93 mark, ultimately rising by 6.19%, closing at $93.75 per ounce. Driven by external markets, the main contract for Shanghai gold rose by 1.31%, closing at 1160 yuan per gram, and the main contract for Shanghai silver rose by 6.95%, closing at 23927 yuan per kilogram.

2. U.S. Dollar Index: The U.S. Dollar Index rose to a high before falling back, ultimately closing down by 0.12%, closing at 97.67.

3. U.S. Treasury Yields: The yield on the 10-year U.S. Treasury bond dropped significantly, closing at 3.964%.

4. RMB to USD Exchange Rate: The RMB to USD exchange rate fluctuated at a high level, closing at 6.863, with an increase of 0.19%.

[Important Information]

1. Geopolitical Conflicts: ① Trump stated that Iran's new leadership wants to resume negotiations, and he has agreed to dialogue. ② Trump claimed he eliminated 48 Iranian leaders in one go, effectively destroying the headquarters of the Iranian Navy. The US military said it destroyed the Revolutionary Guards' headquarters. ③ An interim leadership committee has been established in Iran, consisting of 3 main members including Iranian President Pezeshkian. ④ Iranian Foreign Minister: Iran is open to any efforts that help ease tensions and a new leadership election may be seen in the coming days. ⑤ Israeli Prime Minister: The intensity of strikes against Iran will be further increased in the coming days. ⑥ Trump: Military actions against Iran could last for 4 weeks. ⑦ Former Iranian President Ahmadinejad was attacked and killed, multiple Iranian military commanders confirmed dead. ⑧ US military: 3 US servicemen have died in the operation. Iran claims the attack resulted in 560 US casualties.

2. US Macro: US January PPI month-on-month 0.5%, expected 0.30%, previous value revised from 0.50% to 0.4%. US January PPI year-on-year 2.9%, expected 2.60%, previous value 3.00%.

3. Federal Reserve Observation: The probability of the Federal Reserve reducing interest rates by 25 basis points by March is 6.4%, and the probability of maintaining the current rate is 93.6%. The probability of a cumulative reduction of 25 basis points by April is 22.6%, and the probability of maintaining the current rate is 76.2%. The probability of a cumulative reduction of 50 basis points is 1.2%. The probability of a cumulative reduction of 25 basis points by June is 43.9%.

[Logical Analysis]

Last Friday, although US PPI data slightly exceeded market expectations, indicating that inflationary pressures may intensify, the market's trading focus was on Middle Eastern geopolitical risks, leading to strong fluctuations in gold and silver prices. Over the weekend, the US launched an attack on Iran, which retaliated, resulting in fierce fighting between the two sides. Although Iranian leader Khamenei has confirmed his death, the internal regime of Iran remains and vows to retaliate, causing market risk aversion to spike sharply. In this context, gold and silver prices gapped up this morning. Looking ahead, under the dominance of risk aversion, gold and silver prices are expected to continue to fluctuate strongly, but it is necessary to continuously monitor whether signs of easing the situation appear or if the scope of chaos further expands.

[Trading Strategy]

1. Unilateral: For previous long positions, consider taking profits at highs, and hold the remaining position near the support of last Friday's high.

2. Arbitrage: Wait and see.

3. Options: Consider taking profits on out-of-the-money call options or bull call spread strategies at highs.

The above views are for reference only