Gold-related equities faced collective downward pressure during Tuesday morning trading in Hong Kong, with sector-wide losses dominating the session.
As of the time of writing, Tongguan Gold (00340) declined 4.44% to HKD 2.69, while China Gold International (02099) fell 3.56% to HKD 249. Shandong Gold (01787) retreated 2.69% to HKD 23.84, and Lingbao Gold (03330) slipped 2.06% to HKD 22.80.
Where to Begin
Market sentiment was driven by multiple headwinds. Escalating geopolitical tensions in the Middle East pushed oil prices higher, while the US 10-year Treasury yield briefly surged past the 5% mark during trading. This combination propelled the US dollar index sharply upward to around 99.5, causing spot gold to lose its footing above the $4,300 threshold.
Why Only These Factors Matter Now
Adding to the bearish backdrop, last week's US economic data revealed persistent inflationary pressures. Both the August Producer Price Index (PPI) and Consumer Price Index (CPI) came in hotter than expected, with core CPI surpassing forecasts. Consequently, market pricing now reflects approximately an 87% probability that the Federal Reserve will implement a 25-basis-point rate hike at this week's meeting.
Three Scenarios on the Horizon
Market attention is firmly fixed on the upcoming September FOMC meeting. According to CITIC Futures, investors should monitor three potential outcomes. First, if the Fed raises rates by 25 basis points but delivers a relatively dovish statement, the market may interpret the single hike as a "clearing of bearish factors," resulting in limited impact on gold and silver prices. Second, if the Fed implements the 25-basis-point increase alongside hawkish commentary, expectations of consecutive hikes could emerge, creating sustained downside pressure on precious metals until rate-hike expectations eventually moderate. Third, if the central bank holds rates steady while merely expressing close vigilance over inflation, credibility concerns might trigger a sharp short-term rebound in gold and silver, though lingering rate-hike expectations would likely prevent a sustained recovery, leaving prices vulnerable to continued volatility over the medium term.