The gold price has been continuously hitting new highs, and the gold futures have approached the psychological threshold of 2,700 US dollars per ounce. Factors such as the escalation of Israel's military operations, interest rate cut expectations have supported gold prices. At the same time, most Federal Reserve officials support further interest rate cuts, which also add impetus to the gold price.
From a trader prospective, it is necessary to pay attention to US employment and inflation data, the attitude of Federal Reserve officials, the performance of non-US currencies, changes in geopolitical situations, and investment sentiment. At present, there is a gap between the CME FED watch and the Federal Reserve's dot plot expectations. New announcement data will determine who is right and who is wrong, and changes in market sentiment cannot be ignored. When market speculation is high, funds flow into the gold market. You can operate with the trend, but pay attention to the situation where good news does not significantly push up the gold price. This may imply changes in funds and the pressure of a pullback. At the same time, be vigilant against the pullback caused by profit-taking after the gold price reaches an important threshold.
The yen and oil prices are also attracting much attention. Several major focal points will appear this week, including the Middle East crisis, the general election of Japan's Liberal Democratic Party, and so on. The market expects that US non-farm data will weaken. If this is the case and there is no trigger for capital panic, the gold price is expected to rise again. However, if it triggers concerns about an economic recession, funds may return to the US dollar and drag down the gold price.
Looking back at history, it is not impossible for non-farm data to weaken in October of an election year. For example, in 2020 and 2016. In operations, it is easy for the final value of non-farm data to deviate from expectations. The expected value is only a reference before the announcement. In addition, speeches by Federal Reserve officials or unexpected risk events will also affect the market.
In the oil market, the escalation of Israel's military operations has drawn attention to the response of Middle East oil-producing countries. Although oil prices have rebounded somewhat, there is still a distance from the target. The market expects that surrounding countries may respond. If it affects oil production facilities, oil prices are expected to rebound and support gold prices. This week's OPEC meeting may delay the production increase plan. If there is an unexpected production cut, it will also be good for oil prices.
The general election of Japan's Liberal Democratic Party will be held on September 27. The new party leader will become the prime minister. Historically, after the new party leader is elected, the yen tends to appreciate and Japanese stocks are under downward pressure. However, the new leader's monetary policy tendency is the key. Currently, candidates such as Shigeru Ishiba, Sanae Takaichi, and Shinjiro Koizumi are attracting attention. The trend of the yen affects the gold price. Pay attention to the risk of yen unwinding.
Local voting for the US presidential election has begun. About 40% of voters will vote in advance. Kamala Harris and Donald Trump will have more exposure and speeches. Looking back at the data of October in past election years, the probability of a slowdown in the rise of US stocks is not low, and the gold price may also face downward pressure. This is related to investors' uncertainty about the management of the future new government and leaving the market on the back of good news during elections and earnings seasons. Given the current overbought state of US stocks, if the pullback is confirmed, a large decline is possible. Don't be careless.
By Wayne Lai
A senior financial practitioner in Hong Kong. He has served well-known financial public relations firms, financial media, and investment banks. Past service targets include Societe Generale, CMC Markets, KVB Kunlun, etc. At the same time, he is a part-time lecturer at colleges and universities, a regular guest of financial media, and an author of financial readings. He has represented Hong Kong to attend world financial forums many times. Currently, he is the research and marketing director of Royal Capital. Over the years, he has won multiple industry awards for service institutions.
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