The escalation of the situation in the Middle East has brought energy supply risks back into the focus of market attention, and the impact of rising oil prices on gold has begun to be reflected more as monetary policy restrictions. The attack on energy facilities in the Gulf and the heightened risk of navigation in the Strait of Hormuz have boosted the risk premium on crude oil supply, and caused the fall in US inflation to face new uncertainties. Against the backdrop that inflation has shown strong stickiness before, the continued rise in energy prices may further extend the time for the Federal Reserve to maintain restrictive policies and suppress market expectations for future easing. The Federal Reserve's policy pricing is shifting from standing still in October to focusing on whether to raise interest rates further in December. The chairman of the Federal Reserve recently emphasized that the policy will be evaluated meeting by meeting, without making a clear commitment to the subsequent interest rate path. New York Federal Reserve officials have also sent a signal that interest rates may still be raised during the year. Currently, keeping interest rates unchanged in October is still the market benchmark scenario, but rising oil prices combined with strong inflation data have strengthened expectations for further tightening in December. For gold, the short-term key is whether the market continues to revise terminal interest rate expectations and whether US bond yields can fall accordingly. There are two opposite transmission paths for the impact of geographical conflicts on gold. On the one hand, the escalation of conflict has increased safe-haven demand; on the other hand, energy supply shocks have boosted the risk of inflation and raised the cost of gold holding through the Federal Reserve's policy expectations. The recent pressure on gold prices indicates that the market's repricing of the interest rate path has temporarily overtaken safe-haven purchases. In the future, we need to focus on whether the rise in oil prices is further transmitted to inflation expectations and actual interest rates. In the medium to long term, demand for gold allocation remains resilient. The Central Bank of China continues to increase its gold holdings, and overseas gold ETFs maintain a net inflow of capital, reflecting that diversification of official reserves and institutional asset allocation requirements have not yet been reversed. However, in an environment where short-term monetary policy expectations have been tightened again, the allocation of capital is more reflected in downward support, making it difficult to immediately push gold prices back to the upward trend.

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