Huitong Financial APP News - In early trading in Asia on Tuesday (July 9), spot gold fluctuated in a narrow range and is currently trading near $2362.22 per ounce. Gold prices fell more than 1% to close at $2,358.98 an ounce on Monday, essentially giving up all of Friday's gains as stock market risk appetite picked up and investors took profits after a surge in the previous session on expectations that the Federal Reserve could cut interest rates in September.
Bob Haberkorn, senior market strategist at RJO Futures, said: "There looks like there's a lot of profit-taking, and equities are strong this morning, which is partly competing with precious metals. However, I believe that gold will rise based on the forecast that the Fed will cut interest rates. The Fed watch tool predicts a rate cut in September and possibly another in November or December, which would be bullish for gold. ”
The Nasdaq and S&P 500 hit record highs in the U.S. stock market, and the Dow Jones Industrial Average hit its highest in more than a month. The market is currently pricing in a 71% probability that the Fed will cut rates in both September and December.
Investors will focus this week on Fed Chair Jerome Powell's semi-annual congressional testimony, a series of Fed officials' speeches, and the release of US inflation data on Thursday.
It was reported that China's central bank suspended the operation of increasing its gold reserves for two consecutive months in June. This is one of the triggers for a correction in gold prices.
However, the geopolitical situation is still tense, and the market's expectations for the Fed's interest rate cut in September are gradually rising, and it is expected that bargain buying will provide support for gold prices, and gold prices still have the opportunity to test resistance near the 2400 mark in the future.
Analyst Sybilla Gross and others said gold prices fell on Monday after recording their biggest weekly gain in three months, with the market focused on central purchases. China's central bank did not increase its holdings of gold for the second consecutive month in June, but data showed that both the central bank of India and Poland increased their holdings of gold.
Saxo Bank said in a report: "Gold is erasing some of Friday's gains. In the longer term, we believe investors will be bullish on gold, as uncertainty over the US economy and the unsustainability of the US deficit remain. Fed Chair Jerome Powell is likely to tell lawmakers in his semi-annual testimony on Tuesday and Wednesday that officials need further confirmation that the economy is cooling before cutting interest rates.
Wells Fargo analysts Sarah House and Aubrey George said in a report on CPI data to be released on Thursday that US CPI may stabilize in June, but it is still on a downward trajectory. They expect a 0.1% month-on-month increase in June, a faster pace from a flat in May, "and the decline in gasoline prices has helped keep the overall price increase modest." "The core index is likely to be significantly lower than the monthly average of 0.35% in the first quarter, with a projected rise of 0.24%, while the three-month annualized core CPI will fall to 2.8% from 4.5% in March.
The U.S. dollar index rebounded slightly on Monday, focusing on Powell's speech and US CPI data
The greenback rebounded 0.13% from a more than three-week low to close at 105.02 as a surprise result from the French election offered a chance for the greenback to rebound, but remained weak overall, after Friday's U.S. jobs data boosted bets that the Federal Reserve will soon start cutting interest rates.
French President Emmanuel Macron on Monday asked his prime minister to stay in office for the time being pending difficult negotiations to form a new government, after the left-wing camp unexpectedly led to a standoff in the general election.
Garth Appelt, head of FX and EM derivatives for Mizuho Americas, said: "We're still waiting to see if this coalition can bring together 240 to 250 MPs to form a government that I think would work like in France." We are in a wait-and-see mode. ”
EU-skeptical Le Pen's National Alliance (RN) failed to win a majority in the general election, and some concerns about France's possible exit from the eurozone have eased, according to Helen Given, a forex trader at Monex USA. "If the National League wins, there is actually a small risk that France is starting to move closer to leaving the eurozone. People are just glad that the problem doesn't exist anymore. ”
The U.S. dollar index fell 0.24% to a more than three-week low on Friday after the June jobs report showed solid job growth for the month, but the details of the report softened. The government and health services sector accounted for about three-quarters of the overall job growth, and the unemployment rate reached 4.1 percent, the highest in two and a half years.
The economy also created 111,000 fewer jobs in April and May than previously estimated, and wage growth was the slowest in three years.
Traders will be keeping a close eye on Fed Chair Jerome Powell's testimony before Congress on Tuesday and Wednesday for signs that a rate cut is looming. According to CME Group's FedWatch tool, traders believe there could be two rate cuts this year, with a 76% chance that the Fed will cut rates for the first time at its September meeting, followed by another rate cut in December.
The main U.S. economic data this week is Thursday's June consumer price data.
Some expect Powell to take a relatively dovish tone based on recent data, saying in his speech last week that the U.S. economy is back on track for slowing inflation.
Tony Farren, managing director of Mischler Financial Group, said: "You've seen some less favourable economic data, so I think while he's not overly dovish, in my opinion, it's going to be more dovish, and then we'll see how the consumer price index (CPI) goes." ”
A report released by the Federal Reserve Bank of New York on Monday showed respondents' one-year inflation expectations were 3% as of June and 3.2% in May.
If Thursday's June CPI is in line with expectations, it could make bond investors more optimistic that the Fed may pivot to rate cuts.
"We expect Chairman Powell to signal that if inflation continues to ease in the coming months, interest rate cuts could be as early as September," MUFG analyst Lee Hardeman said in a note. He said that if the core inflation data for June softens again, the Fed will be on track to start cutting interest rates. In this case, the dollar is likely to fall in the coming week, unless there is an unexpected significant rise in US inflation.
Monday's U.S. Treasury moves also reflected in European markets, with French government yields falling to a two-week low, and last Sunday's election led to a parliamentary standoff, easing fears of an absolute majority for the far right.
The U.S. 10-year Treasury yield ended the session at 4.269%, slightly lower than on Friday. The two-year Treasury yield was at 4.618%, up from 4.599% on Friday.
Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, said: "Some geopolitical risks in Europe have eased, which could help dampen US yields for the time being. ”
On the other hand, with US President Joe Biden under pressure to withdraw from his re-election bid, developments surrounding the US election are likely to continue to drive the US Treasury market.
Biden did poorly in his first presidential televised debate last month, with long-term Treasury yields rising in response, and investors are pricing in a widening fiscal deficit and higher policies that lead to higher inflation if Trump becomes president for the second time.
Bank of Montreal Capital Markets strategists said in a note: "Investors' reaction to the new Democratic candidate is uncertain and will likely depend on the individual." "Still, as recent price action shows, the increased likelihood of a Trump return to the White House has led to a steep yield curve, suggesting that if Democrats launch a new contender, the opposite will be true," they wrote. “
In addition, investors still need to pay attention to the support provided by geopolitical tensions to gold prices.
Israel's new assault on Gaza threatens to jeopardize ceasefire negotiations
The Hamas leader said a new Israeli assault on Gaza on Monday threatens ceasefire talks at a critical moment. After a night of heavy bombardment, Israeli tanks drove into the centre of Gaza City and ordered the population to leave.
Residents said the air and shelling was the heaviest in nine months of conflict in Gaza. Thousands of people fled.
At the time of the attack, senior U.S. officials were pushing for a ceasefire in the area. Hamas made significant concessions last week. The militant group said the new offensive appeared to be aimed at sabotaging the talks and called on a mediator to rein in Israeli Prime Minister Benjamin Netanyahu.
Hamas, citing leader Ismail Haniyeh, said the attack "could bring the negotiation process back to square one." Netanyahu and his army will take full responsibility for the failure of this path". Residents said residential areas in Gaza City were bombed overnight until the early hours of Monday. Some of the multi-storey buildings were destroyed, they said.
Gaza Civil Emergency Service, Gaza's emergency service, said dozens of people were thought to have been killed, but emergency teams were unable to approach them as the offensive continued. Gaza residents said that on Monday tanks advanced from at least three directions and arrived in the center of Gaza, supported by heavy Israeli air and ground fire.
According to the Israeli military, militants of Hamas and its allies, Islamic Jihad, attacked Israeli forces behind civilian infrastructure. Israel claims to have eliminated more than 30 militants.
Late Monday, Israel issued a new evacuation order for people to travel to Deir al-Balah in central Gaza City for the Sabra, Rimal, Tel Al-Hawa and Daraj areas. The Israeli military said it would open a corridor for the evacuation of civilians. The Palestinian Fatah Al-Aqsa Martyrs Brigade said they fired mortar shells at Israeli forces during an attack southwest of Gaza City.
As Israel launches a new offensive, Egypt, Qatar and the United States are stepping up efforts to broker a ceasefire between Israel and Hamas. Hamas accepted a key part of the U.S. ceasefire proposal last week, prompting an official from Israel's negotiating team to say that a deal was indeed possible between the two sides and rekindling hopes for a ceasefire among Gaza's residents.
Hamas has abandoned the key requirement that Israel first commit to a permanent ceasefire before the agreement is signed. A source in Hamas, speaking on condition of anonymity, told reporters on Saturday that Hamas said it would allow a permanent ceasefire in the six-week phase one talks. Netanyahu insisted that the deal could not prevent Israel from returning to fighting until its war goals were achieved. When the war first broke out, he promised to eliminate Hamas
A deal would jeopardize Netanyahu's ruling coalition, which includes far-right parties that have repeatedly vowed to withdraw from the coalition if Netanyahu ends the war too soon
Lebanese-Israeli conflict continues Lebanese Allah says it has attacked a number of Israeli military targets
Lebanese Allah issued a statement on the 8th local time, saying that in response to the Israeli army's attack on its southern town, its armed personnel fired rockets into the Galilee region of northern Israel and attacked a building used by Israeli troops in the Israeli-controlled Al-Manara area on the Lebanese-Israeli temporary border with appropriate weapons. In addition, Lebanese Allah fighters shelled Al-Raheb strongholds on the Israeli side of the Lebanese-Israeli interim border and used guided weapons to strike Israeli targets in Shebaa farms.
(Spot gold daily chart, source: Yihuitong)