Gold trading reminder: The US Treasury Secretary's remarks "lock in" the expectation of a September rate cut, the continued decline of the US dollar helps gold prices rebound, and pay attention to PPI and initial jobless claims data
2025-08-14 07:39:28
Spot gold prices fluctuated narrowly in early Asian trading on Thursday (August 14), currently trading around $3,360 per ounce. Wednesday's rebound in spot gold prices stalled, briefly touching $3,370 per ounce, before closing at $3,355.90, up 0.24%. U.S. Treasury Secretary Bensont suggested the Federal Reserve could cut interest rates by 50 basis points in September. The market consensus on a September rate cut has contributed to a continued weakening of the U.S. dollar index and lower U.S. Treasury yields, providing support for gold prices. However, continued record highs in the U.S. stock market and the potential easing of geopolitical tensions have dampened demand for gold as a safe haven.
July's US Consumer Price Index (CPI) data showed a modest, only slightly increasing inflation rate, broadly in line with market expectations. More importantly, this data suggests that the Trump administration's massive tariff policy has yet to significantly transmit through to commodity prices, preventing a sharp surge in inflation. This benign inflationary environment provides strong support for the Federal Reserve's decision to initiate interest rate cuts in September.
Investors have quickly adjusted their expectations, almost fully pricing in a Fed rate cut next month and even beginning to bet on a 50 basis point cut.
In an interview with Bloomberg, U.S. Treasury Secretary Jeffrey Bessant made it clear that the Federal Reserve is likely to implement a series of interest rate cuts and start an easing cycle by 50 basis points. This statement further strengthened the market's optimism and pushed up gold prices.
Because the opportunity cost of holding gold is significantly reduced during a rate-cutting cycle, investors are more inclined to shift funds to this non-interest-bearing asset to hedge against potential economic uncertainties. In addition, the weak performance of July's non-farm payroll data has also exacerbated the pressure signals in the labor market, putting Federal Reserve policymakers under greater pressure to ease the monetary policy.
Nikos Tzabouras, senior market analyst at Tradu, pointed out that it is this combination of data that has made the gold trend so strong. Investors are closely watching the producer price index, unemployment benefit applications and retail sales data to be released this week to further verify the path of interest rate cuts.
Driven by expectations of a Federal Reserve rate cut, the US dollar index fell for the second consecutive trading day this week, dropping 0.28% on Wednesday to an intraday low of 97.61, a new low in more than two weeks. This weakening trend directly reduced the cost of gold for overseas buyers, thereby stimulating a rebound in demand. The dollar's weakening is not accidental, but rather stems from growing expectations of a Federal Reserve rate cut and political pressure from the Trump administration.
President Trump again publicly criticized Federal Reserve Chairman Powell for not cutting interest rates sooner and even considered filing a lawsuit over the mismanagement of the Federal Reserve building renovation project. This political intervention further exacerbated the selling pressure on the US dollar.
Shaun Osborne, chief currency strategist at Scotiabank, believes that Washington's pressure on the Federal Reserve has reached a considerable level, which not only affects interest rate adjustments but also indirectly pushes down the US dollar exchange rate.
Meanwhile, the 10-year U.S. Treasury yield fell 5.3 basis points to 4.24% on Wednesday, while the two-year yield also fell 4.2 basis points to 3.689%. The decline in Treasury yields further reduced the opportunity cost of holding gold, as the attractiveness of gold as a zero-interest asset has significantly increased in a low-yield environment.
Vail Hartman, U.S. interest rate strategist at BMO Capital Markets, stressed that while tariffs are likely to gradually pass through to inflation in the coming months, the lull in July has spurred more calls for rate cuts, especially as the labor market begins to come under pressure.
Although gold has benefited from loose monetary policy, the potential easing of geopolitical factors has to some extent suppressed its buying demand as a safe-haven asset.
News that President Trump will meet with Russian President Vladimir Putin on Friday to discuss ending the war in Ukraine has fueled market optimism about a de-escalation in the conflict. European and Ukrainian leaders have been communicating with Trump ahead of the meeting, hoping to facilitate a ceasefire without harming Ukrainian interests.
Furthermore, the extension of the tariff truce between China and the United States for 90 days also eased tensions in global trade frictions. These developments temporarily led investors to reduce their safe-haven allocations to gold and favor riskier assets. Chicago Fed President Goolsbee stated that the Fed is working to assess the short-term and long-term impact of tariffs on inflation, which will directly influence the timing of interest rate cuts.
Atlanta Fed President Bostic pointed out that the U.S. economy is close to full employment, which provides the Fed with the "luxury" of not rushing to adjust its policy. However, these remarks also suggest that if geopolitical risks ease further, the upward momentum of gold may face challenges, as safe-haven demand is one of the traditional supports for gold prices.
In stark contrast to gold's performance, the U.S. stock market saw strong performance. The S&P 500 and Nasdaq hit record closing highs for the second consecutive day on Wednesday, with the Dow Jones Industrial Average rising 1.04% to 44,922.27, the S&P 500 gaining 0.32% to 6,466.58, and the Nasdaq inching up 0.14% to 21,713.14. The Russell 2000 index of small-cap stocks rose nearly 2%, hitting a six-month high.
This round of stock market gains was primarily driven by the near certainty of a Federal Reserve rate cut. The Chicago Mercantile Exchange's FedWatch tool shows that traders have fully priced in a 25 basis point rate cut in September. While technology stocks showed some signs of weakness, such as pullbacks in Nvidia, Alphabet, and Microsoft, Apple rose 1.6%, benefiting from reports of its foray into artificial intelligence robotics.
Katherine Bordlemay, co-head of Goldman Sachs Asset Management, pointed out that although the current valuation of US stocks is high, profitability remains the key, and the degree of return differentiation has reached the highest level in the past 30 years. Although the hot stock market has attracted funds to flow into risky assets, it has suppressed the safe-haven demand for gold.
Looking ahead, if expectations of a 50 basis point rate cut in September further increase, gold is expected to continue its strength and even challenge higher levels; but if geopolitical risks unexpectedly escalate or economic data is stronger than expected, gold prices may also face a correction.
Investors should pay close attention to Powell's speech at the Jackson Hole Symposium next week and the Trump administration's potential adjustments to the successor to the Federal Reserve chairman, which could become turning points for gold prices.
The focus of this trading day is the change in the number of initial jobless claims in the United States and the performance of the US PPI data in July. On Friday, the focus will be on the meeting between Trump and Putin.
(Spot gold daily chart, source: Yihuitong)
At 07:37 Beijing time, spot gold was trading at $3361.61 per ounce.
U.S. Treasury Secretary ignites expectations of a 50 basis point rate cut in September
July's US Consumer Price Index (CPI) data showed a modest, only slightly increasing inflation rate, broadly in line with market expectations. More importantly, this data suggests that the Trump administration's massive tariff policy has yet to significantly transmit through to commodity prices, preventing a sharp surge in inflation. This benign inflationary environment provides strong support for the Federal Reserve's decision to initiate interest rate cuts in September.
Investors have quickly adjusted their expectations, almost fully pricing in a Fed rate cut next month and even beginning to bet on a 50 basis point cut.
In an interview with Bloomberg, U.S. Treasury Secretary Jeffrey Bessant made it clear that the Federal Reserve is likely to implement a series of interest rate cuts and start an easing cycle by 50 basis points. This statement further strengthened the market's optimism and pushed up gold prices.
Because the opportunity cost of holding gold is significantly reduced during a rate-cutting cycle, investors are more inclined to shift funds to this non-interest-bearing asset to hedge against potential economic uncertainties. In addition, the weak performance of July's non-farm payroll data has also exacerbated the pressure signals in the labor market, putting Federal Reserve policymakers under greater pressure to ease the monetary policy.
Nikos Tzabouras, senior market analyst at Tradu, pointed out that it is this combination of data that has made the gold trend so strong. Investors are closely watching the producer price index, unemployment benefit applications and retail sales data to be released this week to further verify the path of interest rate cuts.
A weaker dollar is the immediate catalyst for gold's rise
Driven by expectations of a Federal Reserve rate cut, the US dollar index fell for the second consecutive trading day this week, dropping 0.28% on Wednesday to an intraday low of 97.61, a new low in more than two weeks. This weakening trend directly reduced the cost of gold for overseas buyers, thereby stimulating a rebound in demand. The dollar's weakening is not accidental, but rather stems from growing expectations of a Federal Reserve rate cut and political pressure from the Trump administration.
President Trump again publicly criticized Federal Reserve Chairman Powell for not cutting interest rates sooner and even considered filing a lawsuit over the mismanagement of the Federal Reserve building renovation project. This political intervention further exacerbated the selling pressure on the US dollar.
Shaun Osborne, chief currency strategist at Scotiabank, believes that Washington's pressure on the Federal Reserve has reached a considerable level, which not only affects interest rate adjustments but also indirectly pushes down the US dollar exchange rate.
Meanwhile, the 10-year U.S. Treasury yield fell 5.3 basis points to 4.24% on Wednesday, while the two-year yield also fell 4.2 basis points to 3.689%. The decline in Treasury yields further reduced the opportunity cost of holding gold, as the attractiveness of gold as a zero-interest asset has significantly increased in a low-yield environment.
Vail Hartman, U.S. interest rate strategist at BMO Capital Markets, stressed that while tariffs are likely to gradually pass through to inflation in the coming months, the lull in July has spurred more calls for rate cuts, especially as the labor market begins to come under pressure.
Geopolitical easing signals weaken gold's safe-haven appeal
Although gold has benefited from loose monetary policy, the potential easing of geopolitical factors has to some extent suppressed its buying demand as a safe-haven asset.
News that President Trump will meet with Russian President Vladimir Putin on Friday to discuss ending the war in Ukraine has fueled market optimism about a de-escalation in the conflict. European and Ukrainian leaders have been communicating with Trump ahead of the meeting, hoping to facilitate a ceasefire without harming Ukrainian interests.
Furthermore, the extension of the tariff truce between China and the United States for 90 days also eased tensions in global trade frictions. These developments temporarily led investors to reduce their safe-haven allocations to gold and favor riskier assets. Chicago Fed President Goolsbee stated that the Fed is working to assess the short-term and long-term impact of tariffs on inflation, which will directly influence the timing of interest rate cuts.
Atlanta Fed President Bostic pointed out that the U.S. economy is close to full employment, which provides the Fed with the "luxury" of not rushing to adjust its policy. However, these remarks also suggest that if geopolitical risks ease further, the upward momentum of gold may face challenges, as safe-haven demand is one of the traditional supports for gold prices.
US stocks hit new highs, weakening safe-haven buying
In stark contrast to gold's performance, the U.S. stock market saw strong performance. The S&P 500 and Nasdaq hit record closing highs for the second consecutive day on Wednesday, with the Dow Jones Industrial Average rising 1.04% to 44,922.27, the S&P 500 gaining 0.32% to 6,466.58, and the Nasdaq inching up 0.14% to 21,713.14. The Russell 2000 index of small-cap stocks rose nearly 2%, hitting a six-month high.
This round of stock market gains was primarily driven by the near certainty of a Federal Reserve rate cut. The Chicago Mercantile Exchange's FedWatch tool shows that traders have fully priced in a 25 basis point rate cut in September. While technology stocks showed some signs of weakness, such as pullbacks in Nvidia, Alphabet, and Microsoft, Apple rose 1.6%, benefiting from reports of its foray into artificial intelligence robotics.
Katherine Bordlemay, co-head of Goldman Sachs Asset Management, pointed out that although the current valuation of US stocks is high, profitability remains the key, and the degree of return differentiation has reached the highest level in the past 30 years. Although the hot stock market has attracted funds to flow into risky assets, it has suppressed the safe-haven demand for gold.
Market Outlook
Looking ahead, if expectations of a 50 basis point rate cut in September further increase, gold is expected to continue its strength and even challenge higher levels; but if geopolitical risks unexpectedly escalate or economic data is stronger than expected, gold prices may also face a correction.
Investors should pay close attention to Powell's speech at the Jackson Hole Symposium next week and the Trump administration's potential adjustments to the successor to the Federal Reserve chairman, which could become turning points for gold prices.
The focus of this trading day is the change in the number of initial jobless claims in the United States and the performance of the US PPI data in July. On Friday, the focus will be on the meeting between Trump and Putin.
(Spot gold daily chart, source: Yihuitong)
At 07:37 Beijing time, spot gold was trading at $3361.61 per ounce.
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