During the Asian and European trading sessions on Wednesday (September 9), international oil prices rose again due to geopolitical tensions, while gold prices unusually rebounded from a dip earlier than expected, currently trading around 4401 with a 1% gain. The recent sudden escalation of US-Iran geopolitical conflicts has pushed up oil prices and inflation expectations, which in turn has continuously suppressed gold prices amid expectations of a Federal Reserve rate hike. With the Federal Reserve's monetary policy meeting scheduled for September 16, 2026, approaching, the current market shows significant policy divergence. The US-Iran geopolitical conflict driving up oil prices and fueling inflation, along with the exceptionally strong US non-farm payroll data, provide support for a rate hike. However, pressure from the White House for rate cuts, concerns over bond market risks, and divergent institutional viewpoints significantly limit the Fed's room to raise rates. This decision represents a multi-faceted contest involving economic fundamentals, geopolitical inflation, administrative intervention, and financial stability.

The Core Support for a Rate Hike: Strong Employment Combined with Rising Geopolitical Inflation

The most critical and recent catalyst for this rate hike cycle stems from the escalating US-Iran geopolitical conflict and elevated oil price inflation, which are significant real-time variables that have been continuously developing in recent times. On September 8, US military forces destroyed five Iranian oil tankers, and on September 9, Iran launched a large-scale retaliation, heavily damaging US warships, US-affiliated oil tankers, and multiple vessels crossing the restricted Hormuz area, dramatically expanding the high-risk shipping zone in the Gulf. The sustained maritime confrontation has caused the geopolitical premium on crude oil to surge continuously, with Brent crude approaching the $100 high, marking fresh recent highs and directly amplifying US imported inflation, creating short-term inflation rigidity. This represents the most critical immediate risk variable for this monetary policy meeting. Oil prices currently have strong support from geopolitical conflicts, but are constrained by global demand and high interest rates, presenting a pattern of high-level volatility with limited room for sustained unilateral upward movement. From a fundamental perspective, US non-farm payroll performance has been exceptionally strong, providing underlying support for a rate hike. August non-farm payrolls increased by 162,000, with July data revised upward by 21,000, significantly outperforming the long-term average, while the unemployment rate remained stable at 4.1%. The relatively strong employment data demonstrates that the US economy possesses sufficient resilience to withstand the impact of a rate hike, providing fundamental backing for the Fed's policy tightening.

Key Constraints on Delaying a Rate Hike: Administrative Pressure, Bond Market Risks, and Institutional Divergence

First, senior officials from the Trump administration are collectively pressuring the Federal Reserve to halt rate hikes or even implement cuts in September. Treasury Secretary Bessent has made it clear that the current inflation stems from oil price increases caused by geopolitical conflicts, constituting a supply-side shock. Following the Fed's historical precedents, a rate hike pause could be considered to observe the secondary transmission effects of inflation. Second, there are clear risk warnings emanating from the bond market. Jeffrey Gundlach, known as the "New Bond King," issued a recent warning: if the Fed holds rates steady next week against market expectations, it would push US long-term Treasury yields higher, exacerbating the historic selloff in the bond market. Consequently, he is currently avoiding long-term US Treasuries and prefers short-duration fixed income assets, local currency-denominated emerging market bonds, and physical assets. Furthermore, institutional viewpoints in the market are notably divided. Morgan Stanley has suggested that the current PCE inflation shows no signs of sustained overheating, and supply-driven inflation lacks long-term sustainability, making an urgent rate hike unnecessary. Fed Governor Waller has also adjusted the probability of a September rate hike to a fifty-fifty chance, with policy attitudes turning more cautious, further suppressing the likelihood of a near-term hike.

Baseline Assessment of the Decision: The Fed's Final Choice May Not Be That Important

In summary, whether the Federal Reserve raises rates still depends on Friday's CPI data, meaning the outcome remains unknown until the last moment. However, whether to raise rates is merely a result, while the problems facing the United States remain the same. These include the imported inflation problem from high oil prices, the issue of rising government and corporate financing costs due to Treasury selloffs, the problem of excessive AI spending diverting capital from other sectors, and the concern that US stocks preferably should not crash before the election. Therefore, we believe that even if a rate hike occurs, it would not represent the start of a rate hike window but rather a preventive measure. Ultimately, this would not cause excessive shocks to dollar-denominated commodities such as US stocks or precious metals.

Summary and Technical Analysis: For Gold, a Rate Hike, by Maintaining Fed Independence, Would Benefit the Decline of 10-Year Treasury Yields in the Medium to Long Term

This could lead to a situation where gold experiences a brief decline, creating a "golden pit," and resulting in a pattern of short-term weakness followed by long-term strength. Conversely, if rates are held unchanged, gold prices would initiate a rebound, disappointing expectations regarding Fed independence, prompting the market to continue trading on the logic of US dollar credit deterioration. Gold's subsequent trajectory would then continue to track oil prices, along with the Fed's explanations and subsequent data. On the technical front, gold prices have recently been oscillating near the lower boundary of the trading range, currently forming a daily double-bottom pattern. It remains to be seen whether this can cooperate with fundamentals to trigger a rebound, with support near today's low of 4341 and resistance near 4450. As of 17:42 Beijing time, spot gold was quoted at $4,395.7 per ounce.