Weaker U.S. Dollar Supports Gold While Oil Extends Its Decline

Overview

On August 5, global commodity markets continued to trade in a volatile but range-bound environment, with overall market risk sentiment showing signs of improvement.

As diplomatic efforts between the United States and Iran made progress, concerns over potential disruptions to energy supplies from the Middle East eased further. As a result, international crude oil prices declined for a third consecutive trading session, while the geopolitical risk premium accumulated in recent weeks continued to unwind.

At the same time, a weaker U.S. Dollar Index (DXY) and lower U.S. Treasury yields provided support for gold, allowing the precious metal to post gains for a third straight session.

I. Gold Market: Weaker Dollar Supports Prices as Employment Data Takes Center Stage

Gold prices continued to rise as the weaker U.S. dollar made the precious metal more attractive to overseas investors.

Meanwhile, lower oil prices helped ease inflation concerns, reducing market expectations that the Federal Reserve will further tighten monetary policy. This provided additional support for spot gold prices.

Investors are now awaiting the release of U.S. employment data, which is expected to provide important clues about the Federal Reserve's future interest-rate path.

Market View

• If the U.S. labor market shows signs of cooling, expectations for future interest rate cuts could strengthen further, providing additional upside for gold.

• Conversely, stronger-than-expected employment data could lift the U.S. dollar again, putting renewed pressure on gold prices.

II. Crude Oil Market: Geopolitical Risk Premium Continues to Fade

International crude oil prices remained under pressure.

Following reports from Qatar that diplomatic mediation between the United States and Iran had made positive progress, markets became more optimistic that the risk of a broader Middle East conflict had diminished. As concerns over potential supply disruptions eased, oil prices continued to decline.

However, risks surrounding the Strait of Hormuz and Red Sea shipping routes have not been completely eliminated. Any renewed geopolitical escalation could trigger a sharp rebound in crude oil prices.

Looking ahead, oil prices will continue to be influenced by several key factors:

• Global crude oil inventory levels

• OPEC+ production policy

• Developments in the Middle East

• Global energy demand outlook

Market View

In the short term, oil prices are expected to remain highly volatile as investors closely monitor whether new supply risks emerge.

III. Industrial Metals: Waiting for Demand Recovery

Industrial metals, led by copper, continued to trade within a relatively narrow range.

Markets remain focused on:

• China's manufacturing recovery

• Growth in Artificial Intelligence (AI)

• Expansion of the renewable energy sector

• Rising electric vehicle (EV) demand

• Long-term investment in global power grid infrastructure

In the absence of new macroeconomic catalysts, industrial metals are expected to remain in a consolidation phase.

IV. Market Focus: Macroeconomic Data Returns as the Primary Driver

Overall, commodity markets are gradually shifting away from being driven primarily by geopolitical developments toward a greater focus on macroeconomic data and monetary policy expectations.

Over the coming days, investors will closely monitor:

• U.S. employment data

• The U.S. Dollar Index (DXY)

• Federal Reserve policy expectations

• U.S. Treasury yields

• Developments in the Middle East

These factors will collectively determine the next direction for gold, crude oil, and industrial metals.

Key Takeaway

Commodity markets are entering a new pricing phase.

A weaker U.S. dollar and declining Treasury yields are providing near-term support for gold, while easing geopolitical tensions in the Middle East continue to unwind the risk premium embedded in oil prices. Nevertheless, investor attention has shifted back to U.S. employment data and the Federal Reserve's policy outlook, making upcoming economic releases the key catalyst for the next move in gold, crude oil, and industrial metals.

One-Sentence SummaryMarkets are gradually shifting from trading geopolitical risks to trading U.S. economic data and Federal Reserve policy expectations. In the coming days, U.S. employment figures, the U.S. dollar, and developments in the Middle East will be the key drivers of gold, crude oil, and industrial metals.