HIGH INTEREST RATES, SUPPLY CONSTRAINTS, AND THEIR IMPACT ON THE MARKET
The global macro picture is entering a new era of interest rates, accompanied by significant volatility in energy and traditional investment channels. Below are the core highlights of current market trends. 1. A new era of interest rates and global debt-maturity pressure The U.S. Federal Reserve (Fed) has raised interest rates to 3.75%–4% and is expected to keep them at high levels throughout the 2026–2027 period.
FED FIRST RATE HIKE SINCE 2023: MACRO TREND AND IMPACT ON THE FINANCIAL MARKET
The Federal Open Market Committee (FOMC) has officially approved a decision to raise the benchmark interest rate by 0.25%, bringing the Federal Reserve’s (Fed) target interest rate range to 3.75% – 4.00%. This is the first rate hike by the Fed since July 2023, completely reversing the prior monetary easing cycle. The decision received unanimous approval, with 18/18 members voting in favor.
Interest rate pressure from the Fed and capital flow trends
The latest data show that the market is pricing in an 87% chance that the U.S. Federal Reserve (Fed) will continue raising interest rates at its upcoming meeting. Persistent inflation pressure above the 2% target, along with an increase in the core CPI index, is forcing the U.S. monetary authority to maintain a tight monetary policy. Key developments in the international financial markets: 1. Bond markets and cost of capital
Will gold keep rising when the Fed raises interest rates?
The real yield on US bonds is no longer an absolute drag on the upward momentum of gold. Although, in terms of traditional financial theory, a tightening monetary policy and high interest rates from the US Federal Reserve (Fed) would create downward pressure on non–interest-bearing assets, in reality the market is being driven by stronger structural forces. Below are 8 key arguments explaining why gold’s long-term uptrend remains intact even in the scenario where the Fed continues to raise interest rates.
DRIVING FORCES SUPPORTING THE RISING TREND OF GOLD
Amid rising geopolitical risks and the complex fluctuations of the global macroeconomy, gold $XAUT continues to affirm its position as a core hedging asset channel for large funds. 1. Geopolitical tensions and inflation pressures The escalation of conflict in the Middle East, especially the risk of disruptions to energy supplies through the Strait of Hormuz, is pushing diesel oil prices to record highs. Transportation and production costs have risen sharply, creating fresh inflationary pressure worldwide. This trend directly drives demand for value-protecting assets, in which gold $XAUT plays the top priority role.
MIDDLE EAST TENSIONS, INFLATION PRESSURE, AND ASSET TRENDS
Geopolitical developments in the Middle East remain the focus of attention for global financial markets. The escalation of conflict, along with sharp fluctuations in strategic commodities, is creating a widespread wave of impact on investment capital flows. 1. Middle East conflict and energy supply chain risks The U.S. military has taken action to attack tankers associated with Iran in the Strait of Hormuz area. This is a serious military escalation, posing a direct threat to the world's vital oil and gas shipping routes. Relations between the two sides continue to stall as Iran does not accept unfavorable negotiation terms and tends to prolong tensions in order to target the midterm election period in the United States.