On Monday (September 2nd) morning trading in the Asian market, spot gold hovered around the 2500 mark and is currently trading at around $2503.77 per ounce. Gold prices fell 1% on Friday, as the US dollar and US Treasury yields strengthened after US inflation data met expectations. Gold prices fell to $2494.12 per ounce during trading, but due to the possibility of the Federal Reserve cutting interest rates in September, gold still recorded a monthly increase and closed at $2403.29 per ounce.

The price of gold rose by 2% in August, having previously reached a historical high of $2531.60 on August 20th.

The data released by the US Department of Commerce last Friday (August 30) showed that US consumer spending grew steadily in July, indicating that the economy was still on a relatively stable foundation at the beginning of the third quarter and did not support the Federal Reserve's 50 basis point interest rate cut next month.

Alex Ebkarian, Chief Operating Officer of Allegiance Gold, said that PCE data confirms that inflation is no longer the main focus of the Federal Reserve, as they have shifted their focus to unemployment, further confirming the possibility of a rate cut in September.

Investors are now looking forward to the release of the US non farm payroll report this week.

According to the CME FedWatch tool, traders have slightly raised their bets on a 25 basis point rate cut by the Federal Reserve next month to 69%. After the inflation report is released, the possibility of a 50 basis point rate cut has dropped to 31%, lower than last Thursday's 35%. The market has fully digested the expectation that the Federal Reserve will announce its first interest rate cut in over four years at its September meeting, and the market also believes that a cumulative interest rate cut of about 100 basis points will be implemented in 2024.

The US dollar index rose 0.34% last Friday, marking three consecutive trading days of gains and closing at 101.72, the highest closing price since August 20th. Data shows that a key inflation indicator in the United States is in line with forecasts, while personal spending and income have increased, supporting expectations that the Federal Reserve may cut interest rates by 25 basis points next month instead of 50 basis points.

Some market participants had anticipated a significant interest rate cut in September, believing that the Federal Reserve had fallen behind in easing policy and should catch up.

Specific data shows that the Personal Consumption Expenditures (PCE) price index in the United States increased by 0.2% month on month in July, which is in line with expectations, and the confirmed increase in June was 0.1%. The PCE price index increased by 2.5% year-on-year in July, which is the same as the growth rate in June. After a 0.3% increase in June, consumer spending increased by 0.5% in July.

The PCE price index increased by 2.5% year-on-year in July, which is the same as the increase in June and in line with economists' expectations.

Excluding the volatile food and energy sectors, the core PCE price index increased by 0.2% month on month in July, unchanged from the increase in June. The core PCE price index increased by 2.6% year-on-year, unchanged from the increase in June.

In the three months ending July, the core PCE rose at an annual rate of 1.7% compared to the previous month. The Federal Reserve tracks the PCE price index to monitor the achievement of its 2% inflation target. The Fed has cumulatively raised interest rates by 525 basis points in 2022 and 2023, and has maintained its policy rate target range at the current 5.25% -5.50% for over a year.

The data suggests that the inflation rate is expected to return to the Federal Reserve's 2% target, "said Pooja Sriram, an economist at Barclays Bank. We maintain the baseline forecast of the Federal Reserve cutting interest rates three times this year

The data does not provide any justification for the Fed to cut interest rates by 50 basis points, "said Conrad DeQuadros, senior economic advisor at Brean Capital." This is not the kind of spending growth associated with an economic recession. "

Peter Cardillo, Chief Market Economist at Spartan Capital Securities, said, "It's clear that we will cut interest rates. I think whether to cut interest rates by 25 basis points or 50 basis points is debatable, and it will depend entirely on August's employment data. I expect to cut interest rates three times, and there may be a 50 basis point rate cut in September, depending on the employment data. If this doesn't happen, there may be a 25 basis point rate cut in September and then a 50 basis point rate cut in December

After the release of inflation data, the US dollar index rose to its highest level on the 10th. Last week, the US dollar index rose 1%, marking its best weekly performance since early April.

However, the US dollar index fell 2.6% in August, marking its worst monthly performance since November last year.

The US dollar as a whole also benefited from the end of month cash flow, and was briefly sold off after Federal Reserve Chairman Powell issued the clearest September interest rate cut signal to date at the Jackson Hole Conference.

Another economic report shows that the University of Michigan Consumer Confidence Index rose from an eight month low of 66.4 in July to 67.9 in August, ending a four month downward trend. The survey also shows that American consumers believe inflation will continue to slow down in the coming year, with inflation expectations for August dropping to the lowest level since the end of 2020.

The yield of US treasury bond bonds rose last Friday, and the yield of 10-year treasury bond is bound to end the trend of two weeks of continuous decline. Earlier economic data raised the expectation that the Federal Reserve may choose to cut interest rates slightly at the September meeting.

Anne Wealth Management Chief Economist Brian Jacobsen said, "Income and expenditure were slightly better than expected, and inflation was in line with expectations. This can strengthen the view that the Federal Reserve has successfully landed

Thomas Urano, Co Chief Investment Officer of Sage Advisory, said, "The focus of the market is shifting more towards employment and the labor market rather than inflation. It feels like the market is very confident that inflation is moving in the right direction." "As long as inflation continues to move in this direction, the focus will be on economic growth and the job market

The yield of US 10-year treasury bond bonds rose 3.8 basis points to 3.905% on Friday, rising for the fifth consecutive trading day and recording its first weekly rise in three weeks. However, the yield is still expected to decline for the fourth consecutive month.

Investors need to continue to pay attention to news related to the geopolitical situation.

On September 1st local time, the Lebanese Ministry of Public Health reported that the village of Aitaal Shaab in southern Lebanon was attacked by Israeli drones that day, resulting in four injuries.

On the afternoon of September 1st local time, the small town of Kfar Yuval in northern Israel was attacked by anti tank rockets. It is reported that the rocket came from Lebanese territory and did not trigger an air raid warning when it entered Israeli airspace, causing at least three Israelis to be injured in the incident. The Israeli Defense Forces issued a statement stating that after the attack, they carried out long-range strikes on the rocket launch area.

On September 1st, large-scale protests erupted in Israel, with many people taking to the streets calling for the Israeli government to reach a ceasefire agreement with Hamas and push for the release of Israeli personnel detained in the Gaza Strip.

In the vicinity of the Tel Aviv Ministry of Defense and the Jerusalem Parliament building, journalists saw demonstrators shouting slogans demanding a ceasefire and holding up signs and photos of detained individuals.

According to the website of Israel's "News Agency" on the evening of the 1st, a total of 700000 people participated in the demonstration across the country, including 550000 in Tel Aviv. Israeli media reported that on the evening of the 1st, thousands of protesters set fire to a main road in Tel Aviv, causing the road to be temporarily closed. The police issued a statement stating that they have dispersed some protesters, and at least 12 people have been arrested nationwide during the protests.

On September 1st local time, the Qatari Ministry of Foreign Affairs issued a statement strongly condemning the Israeli military's ongoing military operations in the West Bank, including in the city of Jenin, which have caused casualties. The statement stated that the Israeli military's actions are a blatant violation of international law. The Qatari side calls on the international community to provide necessary protection to the Palestinian people, hold Israel accountable for its war crimes in the Palestinian territories, and pressure Israel to comply with international humanitarian law. The statement reaffirms Qatar's firm position on the Palestinian issue, supports the legitimate rights of the Palestinian people, and calls for the establishment of an independent Palestinian state with East Jerusalem as its capital.

It should be noted that during the US Labor Day holiday, the US stock market was closed on Monday, and trading of CME's precious metals and US crude oil futures contracts ended ahead of schedule at 02:30 Beijing time on the 3rd.

Daily chart of spot gold

This week's outlook: Focus on US employment data, Bank of Canada resolutions, and global PMI

This week, a series of US data will be released, among which the most eye-catching is the August employment report, which will help the market form expectations before the Federal Reserve's interest rate decision on September 18. In addition, the release of interest rates by the Bank of Canada and the purchasing managers' index (PMI) data of major economies will also drive financial market trends.

Monday falls on a public holiday in the United States and Canada. In terms of US data, the final values of ISM manufacturing PMI and S&P global PMI will be released on Tuesday, factory orders, JOLTS job vacancies, trade balance data, and the Federal Reserve's Beige Book will be released on Wednesday, and ADP's August employment report, one week unemployment data, and ISM services PMI will be released on Thursday.

The highlight is naturally the US non farm payroll report on Friday; The survey predicts that 165000 new job opportunities may be created in August, and the unemployment rate is expected to drop to 4.2%. After the data is released, the third in command of the Federal Reserve and President of the New York Fed, Williams, will give a speech.

It is expected that the Bank of Canada will lower interest rates for the third consecutive time at its meeting on Wednesday, as inflation weakens and the labor market slows down. The latest Reuters survey shows that all 28 surveyed economists expect a 25 basis point rate cut to 4.25%. In addition, the country will also release PMI, trade, and employment data.

The Eurozone will release the final August PMI, July retail sales, and second quarter GDP correction. Germany's industrial orders, manufacturing output, and industrial production will help people quickly understand the struggling German economy.

The only heavyweight data for the UK is the construction PMI on Thursday, and the Bank of England has not scheduled any significant statements on this matter.

This week's data in Japan is light, with only PMI final values and household expenditures. The main economic event was the speech and press conference by Bank of Japan's deliberation member, Chuang Takada, on Thursday.

China's August Caixin Manufacturing and Service PMI will be released on Monday and Wednesday respectively. The manufacturing PMI fell below the boom bust threshold of 50 in July, so it will be closely monitored. Trade data will be released on Saturday, and exports may continue to be under pressure due to Western tariffs and weak demand, while imports may slow down after a surge in July.

Australia's key data includes Q2 GDP, current account balance, and July trade data. Reserve Bank of Australia Chairman Brock will give a speech and attend a fireplace talk on Wednesday, and the market will closely monitor it. New Zealand will announce its trade terms for the second quarter.