On Thursday morning (September 26th), spot gold fluctuated narrowly in the Asian market, currently trading around $2656.9 per ounce. Despite expectations of a Federal Reserve interest rate cut and geopolitical instability, which helped gold prices hit a historic high near $2670 on Wednesday, gold prices subsequently fluctuated and fell back. Due to a smaller than expected decline in new home sales in the United States in August, Federal Reserve officials stated that inflation would not fall below 2%, and US dollar and Treasury yields rose sharply, causing concerns among gold bulls.

David Meger, head of metal trading at High Ridge Futures, said, "I believe we are still in the midst of a wave of central bank policy easing, and there may be further policy easing in the future. I think the expectation that the US dollar will weaken also provides support for gold prices

According to the CME FedWatch Tool, investors believe there is a probability of approximately 59% that the Federal Reserve will cut interest rates by another 50 basis points in November.

Traders are waiting for Fed Chairman Powell's speech and US inflation data later this week to obtain further policy clues.

Phillip Streible, Chief Market Strategist at Blue Line Futures, said: 'If we continue to see the labor market weaken, if we see Fed policymakers all reiterating a 50 basis point rate cut, then we may see a level of $2700 per ounce in the next one or two days.'“

So far in 2024, gold prices have risen by over 29%, attributed to the relaxation of central bank policies and geopolitical issues.

However, the daily level K-line recorded a cross star on Wednesday, which is a top signal. As the US dollar stabilizes and rebounds, we need to be cautious of the short-term pullback risk of gold prices.

This trading day will release the changes in the number of initial jobless claims in the United States, the initial monthly rate of durable goods orders in August, and the final GDP value of the second quarter of the United States. Investors need to pay close attention to this. In addition, there will be speeches from multiple Federal Reserve officials on this trading day, and investors also need to pay attention to the geopolitical situation.

(Daily chart of spot gold)

Israel claims it may launch a ground operation against Lebanon, as all parties strive to avoid a full-scale war

Israeli military leaders told the army on Wednesday that Israel's fierce airstrikes on Lebanon were preparing for a possible ground operation against Hezbollah militants. At the same time, all parties are making a series of diplomatic efforts to prevent the outbreak of a full-scale war.

According to the Israeli military statement, Israeli General Herzi Halevi said to the army on the Lebanese border, "You heard the sound of fighter jets overhead; we have been conducting strikes all day... This is both to prepare for your possible entry and to continue to strike Hezbollah." In response, a Pentagon spokesperson stated that Israel's ground invasion does not seem imminent.

According to a compilation of statements from the Lebanese Ministry of Health, Israel expanded its airstrikes on Lebanon on Wednesday, resulting in at least 72 deaths.

Israel shot down a missile, which Hezbollah claimed was aimed at the headquarters of Mossad intelligence agency near Israel's largest city, Tel Aviv. Israeli officials said that a heavy missile flew towards a civilian area in Tel Aviv before being shot down, rather than Mossad headquarters.

As the death toll in Lebanon continues to rise and thousands of people flee their homes, world leaders are concerned about the rapid escalation of the conflict.

UN Secretary General Guterres pointed out that a full-scale war must be avoided at all costs, and Lebanon cannot become another Gaza.

Cyprus President Nikos Christodoulides stated on the sidelines of the United Nations General Assembly in New York that the United States and France are attempting to reach a temporary agreement to cease hostilities in order to initiate broader talks, including efforts to achieve the long sought ceasefire in Gaza.

US Secretary of State Antony Blinken said that Washington and its allies are making unremitting efforts to avoid an all-out war between Israel and Hizbullah.

French President Macron said that as part of his efforts to prevent the outbreak of war, he will send his Foreign Minister to Lebanon this week.

Three Israeli sources said that significant progress has not been made in the efforts of France and the United States.

Israel's Permanent Representative to the United Nations, Danny Danon, told reporters in New York that Israel welcomes a ceasefire and tends to resolve the Lebanese issue through diplomatic means, but if diplomatic efforts fail, Israel will use all available means.

Iranian Foreign Minister Abbas Araqchi stated at the United Nations that Iran supports Hezbollah and will not remain indifferent to a full-scale war in Lebanon. He also said that the region is on the brink of a comprehensive disaster.

The decline in new home sales in the United States in August was smaller than expected, and the median house price fell

The decline in sales of newly built single family homes in the United States in August was smaller than expected, and sales may regain momentum in the coming months as mortgage rates and housing prices decrease to stimulate demand.

The report released by the US Department of Commerce on Wednesday also showed that new home sales in the previous three months exceeded initial expectations. Last week, the Federal Reserve lowered its interest rate target range by 50 basis points to 4.75% -5.00%, marking the first time since 2020 that borrowing costs have been reduced. Mortgage interest rates have dropped to their lowest level in over a year and a half, while the supply of second-hand homes in the market still exceeds demand.

We expect that the decline in mortgage rates, suppressed demand, and relatively scarce supply of existing homes, despite recent increases, will support moderate growth in new home sales from 2024 to 2025, "said Nancy Vanden Houten, Chief US Economist at Oxford Economics

The US Bureau of Statistics stated that new home sales in August decreased by 4.7% month on month, with a seasonally adjusted annual rate of 716000 households. The annual sales rate for July was revised up from 739000 households to 751000 households. The sales data for May and June have also been revised upwards.

Economists previously predicted that new home sales, which account for 15.6% of US housing sales, would drop to 700000 households. New home sales are recorded at the time of contract signing, however, monthly data may fluctuate. New home sales increased by 9.8% year-on-year in August.

The median price of new homes in August decreased by 4.6% year-on-year to $420600. Most of the new homes sold this month were priced between 300000 and 499900 US dollars.

The new home market benefits from the insufficient number of second-hand houses available for sale, encouraging builders to accelerate the construction of new homes.

The inventory of new houses in August increased from 459000 in July to 467000, recovering to the level of early 2008. Approximately 55.7% of the inventory consists of houses under construction. Completed houses account for 22.5% of the inventory, while the remaining 21.8% are houses that have not yet started construction.

According to the sales rate in August, it takes 7.8 months to sell out the supply of new houses in the market, compared to 7.3 months in July.

Federal Reserve Governor Cugler says inflation is not expected to fall below target

Federal Reserve Governor Adriana Kugler stated on Wednesday that she does not expect inflation to fall below the Fed's 2% target. She pointed out that although some inflation indicators, excluding housing, are below the target, the target is for overall inflation indicators, which are approaching but still above 2%.

Inflation below target is not a fundamental scenario, "Kugler said in a speech at Harvard Kennedy School. She also stated that Federal Reserve decision-makers generally expect further interest rate cuts in the next two years, and the specific timing of the cuts will depend on the data.

The US dollar index has rebounded from a 14 month low

The US dollar fell sharply on Tuesday, as previously released data showed the largest decline in US consumer confidence index in three years in September due to growing concerns about the labor market. But after falling to a nearly 14 month low on Wednesday, the US dollar index rebounded sharply, recovering all of Tuesday's losses and closing at 100.92, an increase of about 0.257%. The key support level and the low level of over a year have shown a "swallowing" bullish bottom signal, and there is a chance for the US dollar to fluctuate and rebound in the future, which may be unfavorable for gold prices.

(Daily chart of US dollar index)

However, Karl Schamotta, Chief Market Strategist at Corpay in Toronto, said, "The shrinking labor market gap is a very bad omen for the US economy, as it reflects to some extent the supply and demand situation in the job market. The market interprets this as a sign that the Federal Reserve is likely to cut interest rates significantly for the second time at its November meeting.

The Federal Reserve launched a rate cut cycle last week, with the first action being a massive 50 basis points cut. Federal Reserve Chairman Powell stated that this move is intended to demonstrate policymakers' commitment to maintaining low unemployment rates while inflation eases.

The main focus of the US economy this week will be the August Personal Consumption Expenditures (PCE) price index released on Friday.

US Treasury yields rise, investors remain optimistic about an economic soft landing

The yield of US treasury bond bonds rose across the board on Wednesday, and the yield of 10-year treasury bond bonds rose in five of the past seven trading days. Investors continue to believe that the Federal Reserve will be able to achieve a soft landing for the world's largest economy in its latest interest rate cutting cycle.

The yield of the two-year treasury bond bond, which is most sensitive to the monetary policy trend of the Federal Reserve, did not fall sharply as expected after cutting interest rates by 50 basis points last week. Since the interest rate cut, the yield of two-year treasury bond has fallen by about 5 basis points in seven days. Considering the extent of the Federal Reserve's interest rate cut, this is not much.

The yield of US two-year treasury bond bonds rose 3.7 basis points to 3.557% late Wednesday, hitting 3.506% overnight, the lowest since September 2022.

The yield of 10-year treasury bond bonds rose 4.9 basis points to 3.784% late Wednesday. Since the interest rate cut on September 18th, the yield has risen by about 3 basis points.

Chip Hughey, Managing Director of Fixed Income at Truist Advisory Services, said, "We are seeing a broad upward trend in yields, which is somewhat counterintuitive in the early stages of the Fed's rate cut cycle. This is because if the Fed expects to aggressively move towards neutrality and move out of... restricted areas, the probability of achieving a soft landing may have already increased

Data released on Wednesday showed that the sales of new houses in the United States fell in August, which had little impact on the treasury bond bond market. But people expect that with the decrease in mortgage interest rates, future housing demand may increase, which could boost the notion of a soft landing. The 30-year mortgage interest rate in the United States dropped to 6.13% last week, the lowest in about two years.

Some people say that the recent trend of yield recovery should have appeared long ago.

Prior to the meeting, the yield dropped significantly, "said Joanne Bianco, investment strategist and client portfolio manager at BondBloxx. I'm not surprised that the yield has rebounded

Bianco also believes in the prospect of a soft landing for the US economy, stating that the US economy is still in a good state. We believe that the US economy is still in that state. We do not expect a hard landing

Truist's Hughey said, "We do believe that the curve will continue to steep, with the front end of the curve continuing to have a more pronounced decline than the back end. If the Federal Reserve intends to act faster than previously expected, the path to inflation cooling may be more bumpy.