On Friday morning (October 25th) in the Asian market, spot gold fluctuated at a high level and is currently trading around $2735.06 per ounce. Gold prices rose nearly 1% on Thursday, closing at $2735.78 per ounce, close to a historical high, boosted by safe haven demand due to ongoing geopolitical concerns.

Although gold prices have fallen from a historical high of around $2758.33, David Meger, head of metal trading at High Ridge Futures, said, "What we are really seeing is that gold continues to be seen as a typical hedge against inflationary pressures, coupled with safe haven demand and capital inflows, gold continues to receive excellent support. The uncertainty before the US election is another pillar supporting the gold market, as the market may feel uneasy before the election

The expectation of further easing of monetary policies by central banks around the world, as well as the traditional reputation of gold as a hedge against economic and political uncertainty, has led to a rise of over 32% in gold prices so far this year and multiple historic highs.

In terms of the geopolitical situation, US Secretary of State Antony Blinken said on Thursday that the United States does not want Israel to carry out protracted military operations in Lebanon. At present, all parties are trying to hold new negotiations on the Gaza ceasefire and hostage agreement.

In terms of economic data, the number of initial jobless claims in the United States unexpectedly decreased last week, but the number of renewed jobless claims in mid October rose to a nearly three-year high, indicating that it is becoming increasingly difficult for unemployed people to find new jobs.

New home sales in the United States increased by 4.1% month on month in September, with an annual rate of 738000 households, the highest in nearly a year and a half; In addition, the increase in corporate activity in the United States in October has eased price pressure.

Cleveland Fed President Hamack stated that inflationary pressures have eased to some extent, but have not yet returned to the level needed to be achieved.

The rise of the US dollar has paused after reaching a nearly three-month high; The yield of the US 10-year treasury bond bond fell from a three-month high. It had previously reached a level that attracted buying interest. However, before the release of the October employment report and the US election in November next week, the bond market is expected to remain under pressure.

According to CME's "Federal Reserve Watch", the probability of the Federal Reserve lowering interest rates by 25 basis points by November is 96.3%, and the probability of maintaining current interest rates unchanged is 3.7%. The probability of maintaining the current interest rate unchanged until December is 1%, the probability of reducing interest rates by 25 basis points cumulatively is 28.5%, and the probability of reducing interest rates by 50 basis points cumulatively is 70.5%.

This trading day, we need to focus on the initial monthly rate of durable goods orders in September in the United States, and continue to pay attention to changes in the geopolitical situation, the US election, and market expectations for the Federal Reserve's interest rate cuts.

The United States does not want Israel's military actions in Lebanon to become a protracted war

US Secretary of State Antony Blinken said Thursday that the United States does not want Israel to carry out protracted military operations in Lebanon. At present, all parties are trying to hold new negotiations on a ceasefire in Gaza and the hostage agreement.

One month after Israel launched a military strike against Hezbollah in Lebanon, supported by Iran, Antony Blinken said he hoped that Iran would receive a clear message that any attack on Israel would endanger its own interests. Israel has vowed to retaliate against Iran's missile attack on October 1st.

The head of the Israeli military stated that the conflict with Hezbollah is expected to end, but did not disclose further details. Reuters witnesses reported that Israel launched multiple attacks on the southern suburbs of Beirut on Thursday evening.

Qatar and Washington have announced that US and Israeli negotiators will gather in Doha to prepare for the resumption of negotiations on the Gaza ceasefire agreement, which will also include the release of hostages held in Gaza.

Israel has stated that its Mossad intelligence agency head David Barnea will travel to Doha before Sunday in an attempt to restart negotiations and meet with CIA Director Burns and Qatar's Prime Minister

Al Qahera News, which has ties to the Egyptian government, reported that an Egyptian security delegation met with a delegation of Hamas leaders in Cairo as part of efforts to resume ceasefire talks in Gaza.

Hamas senior official Osama Hamdan told Lebanese pro Iranian television station Al Mayadeen that the organization's position has not changed. He said, "Only by stopping the aggression and completely withdrawing, will the hostages held by the resistance forces return

Antony Blinken said in Doha: "Israel has taken action to eliminate the threat to Israel and its people near the Lebanon Israel border. We are very clear that this cannot and should not lead to a protracted war." Antony Blinken said that the United States is working hard to reach a diplomatic agreement that allows civilians on both sides of the border to return home.

The Israeli military announced on Thursday that it has killed Hamas commander Mohammad Abu Itiwi, who was involved in the October 7, 2023 attack on southern Israel and also worked for the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) in the Gaza Strip. Israel accuses the organization of having many employees who are also members of Hamas and other armed groups. The Near East Relief Agency did not immediately comment on Israel's latest allegations

Federal Reserve Hamack: The work of returning inflation to target is not yet completed

Cleveland Federal Reserve Bank President Beth Hammack stated on Thursday that inflationary pressures have eased to some extent, but have not yet returned to the levels needed to be achieved.

We have made good progress, but the inflation rate is still higher than the Federal Open Market Committee's (FOMC) target of 2%, "Hamack said at the Cleveland Fed's inflation conference. She did not express her opinion on the actions she believed monetary policy should take in the future. She did point out that the Fed's rate hikes between spring 2022 and summer 2023 played a role in reducing inflation.

As the latest regional Federal Reserve President, Hammack said that although progress has been made in reducing price pressures, it is still too early to say that the work has been completed. This is consistent with recent statements by Federal Reserve Chairman Powell.

Hamak pointed out that "the progress of the inflation rate returning to the 2% target is not a straight line," and added that the situation had some fluctuations at the beginning of this year. "In recent months, inflation data has generally improved compared to the peak reached in June 2022

She also pointed out, "It is worth noting that the process of inflation falling has made progress despite the strong performance of the labor market and the overall economy

The number of initial jobless claims in the United States unexpectedly decreased, but the surge in renewal claims suggests that it is becoming increasingly difficult to find new jobs

Last week, the number of initial jobless claims in the United States unexpectedly decreased, but in mid October, the number of renewed jobless claims rose to a nearly three-year high, indicating that it is becoming increasingly difficult for unemployed people to find new jobs.

The US Department of Labor reported on Thursday that the number of initial state unemployment claims has declined for the second consecutive week, which may reflect a decrease in claims due to Hurricane Helen. Earlier this month, the hurricane caused claims to reach their highest level in nearly a year and a half. The increase in unemployment claims related to Hurricane Milton is smaller than initially feared.

Given the distortions caused by the hurricane and the ongoing strike of approximately 33000 workers at Boeing, economists expect that Federal Reserve policymakers will not place too much emphasis on the significant slowdown in non farm employment growth or rising unemployment rates when they meet next month.

The October employment report will be released a few days before the US presidential election on November 5th.

The labor market is softening, but there hasn't been a sudden collapse, "said Carl Weinberg, Chief Economist at High Frequency Economics. The purpose of Federal Reserve policy is to support the economy and job market before an economic recession forms. The gradual relaxation policy approach taken to achieve this goal may be effective

The US Department of Labor reported that as of the week ending October 19th, the number of initial state unemployment claims decreased by 15000 to 227000 after seasonal adjustment. Economists previously predicted 242000 people.

Last week, the number of unadjusted initial unemployment claims decreased by 22634 to 202635. Although hurricanes and strikes have made the labor market situation uncertain, it seems that there has not been a significant substantive change.

The "Beige Book" report released by the Federal Reserve on Wednesday stated that employment "slightly increased" in early October, with "more than half of the regions reporting slight or moderate growth, and the rest reporting little or no change.

The historically low layoff rate is supporting the labor market and overall economy, despite reduced recruitment. Economists estimate that the hurricane could lead to a reduction of up to 40000 non farm jobs in October. The current estimate for employment growth is in the range of 100000 to 125000.

The unemployment benefit report also showed that as of the week ending October 12th, the number of people who renewed their unemployment benefits, which measures recruitment, increased by 28000, reaching 1.897 million after seasonal adjustment, the highest level since mid November 2021. The surge in the number of unemployment claims reflects the impact of strikes, Hurricane Helen, and permanent job losses caused by layoffs at Chrysler's parent company Stellantis.

The above data on unemployment benefits is within the survey period conducted by the government on households for the October unemployment rate. Between the survey weeks of September and October, there was an increase in the number of people applying for unemployment benefits, increasing the risk of the unemployment rate rising from 4.1% in September.

The report from the Bureau of Statistics of the US Department of Commerce shows that the decline in interest rates drove new home sales in September to the highest level in nearly a year and a half.

However, the supply has increased to the level of early 2008. This may make builders more cautious about breaking ground on new housing projects, especially in the past three weeks when mortgage interest rates have rebounded.

US business activity increases in October, easing price pressure

In October, business activity in the United States increased due to strong demand, with companies raising prices for goods and services at the slowest pace in nearly four and a half years, indicating a robust start to the fourth quarter economy.

S&P Global announced on Thursday that its US Composite Purchasing Managers' Index (PMI) output index, which tracks the manufacturing and service industries, rose to 54.3 at the beginning of October and ended at 54.0 in September. A reading above 50 indicates that the private sector is expanding. Retail sales data suggests that the economic growth rate accelerated in the third quarter.

The Atlanta Fed currently expects the US gross domestic product (GDP) to grow at an annual rate of 3.4% compared to the previous quarter. The economic growth rate in the second quarter was 3.0%. The government is scheduled to announce the initial GDP value for the third quarter next Wednesday.

Chris Williamson, Chief Business Economist at S&P Global Markets Intelligence, said, "Corporate activity continued to grow at an encouraging and steady pace in October, maintaining the upward momentum of the economy so far this year into the fourth quarter

The indicator measuring the average price of goods and services for enterprises in the survey decreased from 54.6 in September to 51.6, the lowest since May 2020. Consumers who are concerned about inflation have been resisting the impact of price increases by downgrading their consumption and purchasing cheaper alternatives.

The indicator measuring the input price of enterprises in the survey decreased from 58.8 in September to 58.1.

As price pressure weakens, demand is rebounding. The survey shows that the indicator for measuring new orders received by private enterprises has jumped from 52.5 in September to 54.2.

Although employment levels remain suppressed, S&P Global points out that the decline in service industry jobs is typically related to unfilled resignations rather than layoffs.

The survey shows that the initial manufacturing PMI for October rose to 47.8, while economists expect it to drop to 47.5, and the final value for September is 47.3.

The initial service sector PMI for October rose to 55.3, higher than economists' expectations of 55.0, and the final value for September was 55.2.

New home sales in the United States increased by 4.1% month on month in September, with an annual rate of 738000 households, the highest in nearly a year and a half

New home sales in the United States rose to their highest level in nearly a year and a half in September, as homebuyers seized the opportunity of declining mortgage rates to enter the market.

The US Department of Commerce announced on Thursday that new home sales in September increased by 4.1% month on month, with a seasonally adjusted annual rate of 738000 households, the highest level since May 2023.

In August, the sales of new houses were reduced to 709000 households, compared to the previous value of 716000 households. Economists interviewed by Reuters previously predicted that new home sales would climb to 720000 households in September. New home sales account for over 15% of housing sales in the United States.

New home sales increased by 6.3% year-on-year in September.

US 10-year treasury bond bond yield fell from a three-month high, but the bond market is expected to be under pressure before the election

The yield of the US 10-year treasury bond bond fell from a three-month high on Thursday. It had previously reached a level that attracted buying interest. However, before the release of the October employment report and the US election in November next week, the market is expected to remain under pressure.

The employment report in September was much stronger than expected, driving the yield of treasury bond bonds higher, and investors repriced the position of the Federal Reserve to be less dovish.

The fundamentals of the US economy have rebounded, "said Michael Lorizio, head of US interest rate trading at Manulife Investment Management in Boston. The September employment report caught us off guard... This led to a decrease in risk appetite among market participants, resulting in an increase in returns

The yield of the 10-year treasury bond bond fell 4.2 basis points to 4.199% late Thursday, hitting the highest 4.26% since July 26 on Wednesday.

The yield of US two-year treasury bond bonds, which tracks the expectation of interest rate movements, fell 1.6 basis points to 4.07% on Thursday.

Before the US election on November 5, investors were generally cautious about buying treasury bond.

The gambling market, including Polymarket, shows that Trump is more likely to win the presidential election, and Republicans may also gain a majority in the Senate and House of Representatives.

Vail Hartman, a US interest rate strategist at BMO Capital Markets in Melbourne, said, "The market seems to be increasingly inclined to assume that the Republican Party may win a big victory

Whether Trump or Vice President Harris takes office in the White House, the budget deficit of the United States is expected to worsen, and the increase in government spending may lead to an increase in the issuance of treasury bond. Trump's tariffs and illegal immigration policies are also expected to exacerbate inflation.

On Thursday, the Ministry of Finance auctioned $24 billion worth of five-year inflation protected bonds (TIPS) due to weak demand. Investors demanded a premium to purchase these bonds, and the winning bid rate was 1.67%, which is higher than the secondary market's approximately 1.64% at the bid deadline.

The US dollar has fallen from a three-month high

After rising to a near three-month high, the US dollar's upward trend paused and fell 0.38% from its near three-month high set on Wednesday, closing at 104.26, reversing all of Wednesday's gains. The daily candlestick formed a bearish top signal, and investors need to be vigilant. If the US dollar further rebounds, it may provide opportunities for gold prices to continue to rise.

(Daily chart of US dollar index)

The US dollar has risen in 16 of the past 18 trading days, and is expected to rise for the fourth consecutive week. As a series of positive economic data has eased expectations on the scale and speed of interest rate cuts by the Federal Reserve, it has also boosted the yield of US treasury bond bonds.

Senior analyst Joseph Trevisani said, "What we are seeing now is some profit taking. But behind this, of course, there are changes in interest rates and views on what the Fed will do. This has not changed, so we are still watching

European Central Bank hawks make cautious remarks, betting on further and greater interest rate cuts to cool down

Three European Central Bank decision-makers attempted to cool down market bets on further and larger interest rate cuts on Thursday, urging the ECB to act gradually or at least maintain the possibility of multiple options.

The European Central Bank has cut interest rates three times this year, and investors have been encouraged by weak economic data and recent statements from some policymakers, betting on faster and greater rate cuts in the future.

But the tone of speeches by the central bank governors of Slovenia, Germany, and Latvia on Thursday was more cautious.

We should continue to return to neutral interest rates at a moderate pace, "said Bostjan Vasile, President of the Slovenian Central Bank, on the sidelines of the International Monetary Fund (IMF) and World Bank autumn meetings in Washington.

Economists define the neutral interest rate as a level of interest that neither limits nor stimulates economic growth, with estimates ranging from 2% to 2.5% for the eurozone, but there are also estimates as high as 3% and as low as 1.75%.

The current deposit interest rate of the European Central Bank is 3.25%. There is no discussion about the urgency of inflation falling below the target or interest rates falling below neutral levels. These are not the current issues facing us, "added Vassler.

Mario Centeno, the President of the Portuguese Central Bank, believes that there may be a 50 basis point interest rate cut in December, which is twice the magnitude of the European Central Bank's past three interest rate cuts, and the interest rate may eventually drop to a level that can stimulate economic growth again.

Italian Central Bank President Fabio Panetta also holds the same view.

The inflation rate fell below the European Central Bank's 2% target in September. Although it is expected that the inflation rate will rebound in the last few months of 2024, some regulatory committees have stated that inflation should return to the target level in early 2025, which is earlier than expected, and inflation below the target will become a real risk.

Latvian Central Bank President Martins Kazakhstan acknowledged the possibility, but stated that this is not a way to abandon the European Central Bank's decision-making process through successive meetings, but rather a reason to provide forward guidance as advocated by Panetta on Wednesday. We will still follow the working method we have adopted so far, which is to study all data, not just specific data points, and make decisions in meetings one by one.

German Central Bank President Joachim Nagel also stated that the European Central Bank should not "hastily" end its action to combat inflation and should "cautiously" monitor future data releases. This coincides with the remarks made by European Central Bank President Lagarde a day ago.

A survey conducted earlier on Thursday showed that business activity in the eurozone stagnated again in October, indicating an economic contraction. Although companies have hardly raised prices, domestic and foreign demand is declining.

Vassler and Casaks stated that a "soft landing" in the economy, where growth slows down but there is no economic recession, is still the basic scenario, but they acknowledge that risks are increasing.

The basic scenario for an economic soft landing and eventual recovery remains, "said Vassler. However, recent data suggests that some risks are becoming a reality, which may delay the expected improvement in growth.

(Daily chart of spot gold)