On Tuesday morning (September 17th), spot gold fluctuated narrowly at a high level in the Asian market, currently trading around $2583.33 per ounce. Gold prices rose slightly on Monday, reaching a record high of $2589.52 per ounce, aided by the weakening of the US dollar and expectations that the Federal Reserve will announce a significant interest rate cut at this week's policy meeting.

Although there were some short-term long positions of profit taking at high levels, the gold price still closed near historical highs, closing at $2589.89 per ounce on Monday.

This trading day will release the 'terrifying data' - the monthly retail sales rate of August in the United States, which investors need to pay close attention to. The current market expectation is -0.2%, compared to the previous value of 1%. This expectation is slightly biased towards supporting gold prices before the data is released.

The focus of this week is the Federal Reserve interest rate decision to be announced on Wednesday. According to the CME FedWatch Tool, traders expect a 50 basis point rate cut to rise to 67%, up from just 13% last Thursday.

The expectation of a 50 basis point interest rate cut by the Federal Reserve this week has heated up, causing the US dollar to continue its downward trend. The US dollar index fell 0.45% on Monday, making gold more attractive to buyers holding other currencies.

Phillip Streible, Chief Market Strategist at Blue Line Futures, said, "The 50 basis point rate cut by the Federal Reserve has now been digested by the market. That's why gold futures prices are so high. I believe that if we see only a 25 basis point rate cut, gold futures will fall back

An analyst from ANZ Bank stated in a report, "We expect the recovery of gold strategy investments to drive up prices. A 100 basis point rate cut could drive net inflows of 200-250 tons of exchange traded funds (ETFs) in the coming months. We expect gold prices to move towards $2700 in the short term and reach a high of $2900 by the end of 2025

It is widely expected that the Federal Reserve will announce at least a 25 basis point rate cut at the end of its September policy meeting on Wednesday. The expectation of a 25 basis point rate cut was much higher last week, but reports from The Wall Street Journal and The Financial Times last week sparked speculation among traders that the Federal Reserve may cut interest rates by 50 basis points more aggressively.

Marc Chandler, Chief Market Strategist at Bannockburn Global Forex, said, "There is currently only one theme, and that is the continuation of what we saw last week: after the CPI was released, the market was reassured about a 25 basis point rate hike, but many people suspect that the Federal Reserve planted a theme to put a 50 basis point rate cut back on the table. The market has already responded accordingly. In fact, they are still continuing to adjust

On Monday, the US dollar index hit a low of 100.59, approaching the nearly 14 low of 100.51 set at the end of August, and closed at around 100.66. This continues to provide support for gold prices. However, it should be noted that if the US dollar index can hold onto the support line of 100.50 (which has been supported by the US dollar index multiple times in the past year before rebounding), gold prices may experience a pullback.

As the high-profile Federal Reserve meeting is about to be held, the yield of treasury bond bonds has been falling, especially when the possibility of interest rate cut by 50 basis points increases.

The yield on the US 10-year treasury bond bond fell by 30 basis points in about two weeks. The two-year yield, which is more closely linked to monetary policy expectations, has decreased from about 3.94% two weeks ago to 3.5509%. This also provides support for gold prices.

The global central banks entering a cycle of interest rate cuts also provide support for gold prices. The European Central Bank cut interest rates by 25 basis points last week, despite European Central Bank President Lagarde suppressing expectations of another reduction in borrowing costs next month.

Peter Kazimir, the Managing Director of the European Central Bank, stated on Monday that the ECB should almost certainly wait until December to cut interest rates again to ensure that policy mistakes are not made due to too rapid easing.

European Central Bank Chief Economist Liam said on Monday that the central bank should continue to gradually cut interest rates, but other decision-makers have expressed different views on how to signal a rate cut given the economic uncertainty.

The European Central Bank cut interest rates for the second time this year last Thursday, but provided little guidance on further action. However, some policymakers privately believe that it is too early to cut interest rates again in just five weeks.

The market currently believes that there is only a 25% chance of the European Central Bank cutting interest rates on October 17th, but expectations for the ECB may change after the Federal Reserve announces its policy decision later this week.

If the latest released data meets the baseline estimate, it would be appropriate to adopt a gradual approach to reduce restrictive measures, "Lian En said. We should retain the option to adjust the pace

He believes that if the trend of economic recession or slowing inflation intensifies, the European Central Bank may need to accelerate interest rate cuts, but if unexpected events occur in the opposite direction, it will have to slow down.

The Bank of England is expected to maintain its key interest rate at 5% on Thursday, after launching a loose policy in August that lowered interest rates by 25 basis points. The futures market expects a 35.9% chance of a 25 basis point rate cut on Thursday, compared to a 20% chance on Friday.

The gold price is also supported by the geopolitical situation. On the 16th local time, the Russian Ministry of Defense reported that the Russian military struck targets such as Ukrainian drone production workshops and warehouses, as well as infrastructure at military airports. The Russian air defense system shot down Ukrainian MiG-29 fighter jets and intercepted Ukrainian air bombs, multiple rockets, and multiple drones. In addition, the Russian military has controlled two settlements in the Kursk region and continues to destroy the Ukrainian military front. The General Staff of the Ukrainian Armed Forces reported that as of the afternoon of the 16th, the Ukrainian army continued to engage in combat with the Russian army in multiple directions and repelled multiple Russian attacks. Among them, the battle in the direction of Kulahovo was the most intense.

In addition to the 'terror data', investors also need to pay attention to the US August industrial output rate on this trading day, and pay attention to changes in market expectations for the Federal Reserve's decision and related geopolitical news.