On Wednesday (August 29), during the Asian morning session, spot gold fluctuated within a narrow range, currently reported at around $2507.14 per ounce. The previous day, gold prices fell by 0.8%, closing at $2504.46 per ounce due to a stronger dollar as investors focused on key inflation data for clues on the Fed's potential rate cut in September. Today, the market will also pay attention to the changes in U.S. initial jobless claims and the revised second-quarter GDP.
On Wednesday, the dollar rose 0.5%, closing at 101.06, marking its largest one-day gain since June, making gold more expensive for holders of other currencies.
David Meger, Director of Metals Trading at High Ridge Futures, stated, "We see some pressure from a stronger dollar. Currently, we are waiting for further data to decide the market's next move." He added, "Therefore, there is some profit-taking and consolidation in the market."
Investors are also closely watching the quarterly earnings report of chip giant Nvidia and the U.S. Personal Consumption Expenditures (PCE) data to be released on Friday. On Wednesday, Nvidia's forecast for its third-quarter gross profit margin fell short of market expectations, while revenue was in line, failing to impress investors betting billions on the future of generative artificial intelligence (AI). After the market closed on Wednesday, Nvidia's stock fell by 8% at one point.
According to the CME FedWatch tool, the market expects a 63.5% chance of a 25-basis point rate cut by the U.S. in September and a 36.5% chance of a 50-basis point cut.
According to the World Gold Council, gold ETFs saw a net inflow of 8 tons (approximately $403 million) last week, primarily contributed by North American funds.
Additionally, data showed that China's net gold imports via Hong Kong increased by 17% in July, the first growth since March. As a major gold-consuming country, the increase in Chinese demand is expected to support global gold prices.
Geopolitical tensions also attracted support from low-level buying. On Wednesday, gold prices hit a low of $2493.59 per ounce but were repeatedly supported by bargain-hunting and safe-haven demand, helping prices close above $2500.
From a technical perspective, the upward momentum of gold prices has weakened, with the KDJ indicator forming a death cross at a high level and the MACD red bars shortening, showing a death cross trend. Investors need to be wary of the risk of short-term peaking in gold prices. The 21-day moving average at $2469.35 is a key support level; if it breaks, it will further increase bearish signals.
End-of-month demand pushed the dollar to its biggest one-day gain since June, as the market awaited upcoming economic data. The dollar rose on Wednesday due to month-end capital flows and technical factors, previously causing it to fall to its lowest point in over a year. Traders are waiting for data to decide whether the Fed will start a new round of easing.
This month saw significant volatility in the forex market, with concerns about a potential U.S. recession and hawkish signals from the Bank of Japan hitting the dollar and causing other major currencies to surge.
Corpay's Chief Market Strategist Karl Schamotta stated, "As multiple potential risk events approach, including Nvidia's earnings report and next week's non-farm payroll report, traders are cutting risk exposure and buying the dollar against high-beta currencies."
Despite the dollar index rising 0.5% to 101.06 on Wednesday, the dollar has fallen by 2.8% since August, likely marking its largest monthly decline since November 2023. The dollar touched a 13-month low of 100.51 the previous trading day as Fed rate cut expectations were recalibrated.
Convera's Global Macro Strategist Boris Kovacevic stated, "Given the decline this month, today's dollar rally is reasonable. The capital flow indicates that Wednesday's dollar buying was mainly part of month-end capital movement."
With Fed Chairman Powell delivering dovish remarks last week, investors broadly expect the Fed to begin rate cuts next month, and the focus is currently on whether the rate cut will be 50 basis points or 25 basis points.
According to calculations by the London Stock Exchange Group, the market currently expects a probability of 37% for a significant rate cut, unchanged from the previous day. A rate cut of about 105 basis points is expected by the end of the year.
Later this week, the United States will release preliminary second-quarter GDP estimates and the core Personal Consumption Expenditures (PCE) price index, two inflation indicators favored by the Fed. If results are below expectations, it may further depress the dollar.
City Index Senior Market Analyst Matt Simpson pointed out that given the market's rate cut expectations for September have been in place for several weeks, the downward trend of the dollar might be weakening, with the dollar index forming support between 100.18 and 100.30.
Corpay's Schamotta stated, "Looking more broadly, the valuations of various assets seem overextended. If investors continue to hesitate in the coming weeks, the dollar’s global dominance might re-emerge."
Atlanta Fed President Bostic stated that now might be an appropriate time to cut rates but wants to ensure everything is in place before taking action. He mentioned that the rise in unemployment and the faster-than-expected decline in inflation make action in September appear reasonable. The Fed's next meeting is scheduled for September 17-18.
As of 07:40 Beijing time, spot gold was reported at $2507.26 per ounce.
