Gold prices are falling back, but the bullish logic is stronger? Institutions: US fiscal deficit deterioration + stagflation risk become the biggest "support" for gold.

While under short-term pressure, the gold market is experiencing stronger long-term support. Institutional analysis indicates that the continuous expansion of the US fiscal deficit, combined with rising inflation and risks from GEO Group Inc, are providing structural support for gold demand, despite the temporary suppression of gold prices by rising interest rate expectations. Ole S. Hansen, Head of Commodity Strategy at Saxo Bank, stated that as the US fiscal situation deteriorates further from a "key level", investors are increasing their hedging demand against "debt sustainability risk", which will be an important DRIVE supporting the long-term trend of gold. He pointed out that against the backdrop of continuously rising government debt, the attractiveness of gold as a safe-haven asset is increasing. Recent changes in the market environment have significantly disrupted the gold market. Due to the escalation of tensions in the Middle East, the global energy supply is facing challenges, causing a sharp rise in oil prices and raising concerns about inflation. At the same time, major US stock indexes are weakening, while US bond yields are significantly rising, with the 2-year US bond yield surpassing the federal funds rate level for the first time in three years, signaling to the market a potential shift towards interest rate hikes in the future. Under the dual pressure of rising interest rates and changing policy expectations, the price of gold has experienced a correction. Analysts believe that higher real interest rates reduce the attractiveness of gold as a non-interest-bearing asset, while a stronger US dollar also puts pressure on gold prices. However, from a longer-term perspective, the fundamental support for gold remains solid. Hansen pointed out that the current macroeconomic environment is gradually showing signs of stagflation, with high inflation, slowing economic growth, and continuous government debt accumulation, which traditionally favors the performance of tangible assets including gold. Furthermore, the "spillover effect" brought about by Iran exerting influence on the energy market is expanding, increasing global economic uncertainty and further strengthening the demand for safe-haven assets. Overall, despite short-term pressure on gold from changes in interest rates and policy expectations, in the context of expanding fiscal deficits, increasing inflation, and ongoing political risks from GEO Group Inc, its long-term strategic value is still favored by the market. Related gold and gold mining ETFs will continue to be a focus for investors. As of Friday, the gold ETFs (GLD.US) and VanEck Merk Gold Stock Fund (OUNZ.US) fell by over 1.8%, the gold mining ETF (GDX.US) fell by over 3%, and Harmony Gold Mining Co. Ltd. Sponsored ADR (HMY.US) fell by 0.92%.