On Tuesday (July 23) morning trading in the Asian market, spot gold fluctuated narrowly and is currently trading around $2395.51 per ounce. On Monday, gold prices fell to a low of $2383.82 per ounce in over a week, closing at $2396.26 per ounce. US Treasury yields continued to rebound, putting slight pressure on gold prices but reducing overall volatility. Traders are waiting for more US economic data and statements from Federal Reserve officials later this week to obtain more information on the schedule for interest rate cuts, as news related to the US election also affects market sentiment.

CPM Group Managing Partner Jeffrey Christian said, "We see the gold market calm today" because "they are waiting for what the changes in the Democratic presidential candidate will mean for the election and for the entire country and the world.

US President Biden gave up his struggling re-election campaign on Sunday under increasing pressure from his Democratic colleagues and supported Vice President Harris to succeed him as the party's candidate, facing Republican candidate Trump in the November election.

At present, the market is paying attention to the US Q2 Gross Domestic Product (GDP) data to be released on Thursday, as well as the Personal Consumption Expenditure (PCE) price index on Friday.

According to CME FedWatch Tool, the money market has fully digested the expectation of the Federal Reserve cutting interest rates by 25 basis points before September.

As the possibility of interest rate cuts in the United States increases this year, gold prices hit a record high of $2483.60 per ounce last week.

This trading day focuses on the annualized total sales of existing homes in the United States in June, as well as news related to the US presidential election and geopolitical situation.

Harris received Pelosi's endorsement, quickly strengthening support within the Democratic Party for his candidacy for the US presidency

US Vice President Harris quickly strengthened Democratic support for her presidential campaign on Monday. After President Biden suddenly announced his withdrawal from the race, she received promises from hundreds of national representatives, announced the raising of large funds, and gained support from senior Democrats.

Former Speaker of the United States House of Representatives Nancy Pelosi expressed support for Harris to succeed Biden as the Democratic presidential candidate. Pelosi maintains her influence even after stepping down as Speaker of the House in 2022. Many key figures within the Democratic Party also support Harris.

Pelosi played a leading role in persuading 81 year old Biden to withdraw from the race. People are concerned about Biden's sensitivity and ability to defeat Republican candidate Trump, as well as whether he can hold on for the next four-year term.

With love and gratitude, I salute President Biden for always believing in America's possibilities and giving people the opportunity to realize their self-worth, "84 year old Pelosi said in a statement. We must unite as one, move forward courageously, decisively defeat Trump, and passionately elect Harris as the next President of the United States

According to sources, Harris' campaign team aims to secure the nomination by securing the majority of the nearly 4000 delegates attending next month's Democratic National Convention by Wednesday evening. Campaign officials and allies have made hundreds of phone calls urging delegates to nominate Harris for the presidential election on November 5th.

The Harris campaign team said that less than 24 hours after Biden announced his withdrawal, they raised $81 million, the largest single day fundraising scale in the 2024 bipartisan campaign.

Almost all well-known Democrats who were once seen as potential challengers to Harris have expressed support for her, including Michigan Governor Gretchen Whitmer, California Governor Gavin Newsom, and Kentucky Governor Andy Beshear.

Harris, 59, praised Biden's contributions to the country on Monday, marking her first public appearance since Biden suddenly gave up running for re-election and expressed support for her..

Harris did not specifically mention her new identity as the main contender for the Democratic presidential nomination. She said that after COVID-19 tested positive last week, Biden now feels much better. Harris went to Biden's campaign headquarters in Delaware on Monday afternoon, which is now her campaign headquarters.

Sources indicate that the Trump campaign team has been preparing for Harris to become a potential candidate for several weeks. The Trump team released a detailed document on Monday criticizing Harris' record on immigration and other issues, accusing her agenda of being more liberal than Biden's.

The Trump campaign team stated that Harris supports the crackdown on U.S. Immigration and Customs Enforcement (USICE) and legalizing border crossings, supports the Green New Deal, supports the government's electric vehicle agenda, and encourages efforts to reduce policing budgets.

US Treasury yields rise slightly, market evaluates uncertainty in US presidential election after Biden's withdrawal

US Treasury yields rose slightly on Monday as the market assessed the uncertainty of the US presidential election, following President Biden's withdrawal from running for re-election.

Thomas Urano, Co Chief Investment Officer of Sage Advisory, said, "This has always been a big question mark hovering over the market; many people in the US Treasury market are already preparing for Biden's withdrawal. I am not very surprised that there has not been any significant turbulence in the interest rate structure and term structure

More importantly, the Federal Reserve plays a fairly clear role here because we already have a firm view that inflation is evolving in their direction and growth is slowing down a bit, so the door for the Fed to make some adjustments in the near future is open, so this is another thing that truly attracts the attention of the bond market.

Jonas Goltermann, Deputy Chief Market Economist at Capital Economics, wrote, "Overall, these trends still suggest that in most cases, investors view Trump's first term as the best guide for potential second term expectations. In other words, bond yields are rising, the US dollar is strengthening, and the stock market is generally in a constructive environment

The July yield has declined, with data showing signs of a slowdown in the US labor market and easing inflation, strengthening expectations for the Federal Reserve to cut interest rates this year.

The yield on 10-year US Treasury bonds rose 2.1 basis points to 4.26% on Monday, with the daily chart recording three consecutive gains.

Daily chart of 10-year US Treasury yields

The Federal Reserve is scheduled to hold its next policy meeting at the end of July. According to the Chicago Mercantile Exchange's FedWatch tool, the market believes that the possibility of the Fed cutting interest rates by at least 25 basis points at that time is very small, but it is widely expected to cut interest rates at the September meeting.

Investors will focus on Thursday's Q2 Gross Domestic Product (GDP) report and Friday's June Personal Consumption Expenditure (PCE) price index data to find clues about the path of the Federal Reserve's interest rates.

Market participants are also paying attention to the crucial monetary policy meetings of the Federal Reserve and the Bank of Japan next week. The Federal Reserve may send a signal to prepare for a loose cycle at its next meeting in September, while the Bank of Japan may begin raising interest rates.

In September 2021, after the inflation rate exceeded the Fed's 2% target for three consecutive months, Fed staff and decision-makers changed their passive attitude towards inflation and began using the term "elevated" to describe it.

In May, June, and July of that year, the Federal Reserve only described high inflation after the personal consumption expenditure (PCE) price index, which is used to set inflation targets, rose by more than 4%. Although the PCE price index has dropped to 2.6% and appears to be still declining, this description is still retained in the policy statement of the Federal Open Market Committee (FOMC) responsible for setting interest rates.

The Federal Reserve's policy meeting next week may ultimately remove this description. If that's the case, would it be the strongest so far? The signal indicates that the central bank plans to cut interest rates as early as September and initiate the easing phase of its monetary policy cycle.

Goldman Sachs maintains its forecast for gold prices to reach $2700 next year, predicting that China's central bank's demand for gold reserves will continue

Goldman Sachs stated that due to price sensitivity and recent price surges, China's gold demand is currently experiencing cyclical weakness, but emerging market central banks, including China, may continue to purchase gold frequently, whether disclosed or not.

Earlier this month, official data showed that the People's Bank of China did not purchase gold for the second consecutive month in June to increase reserves.

Goldman Sachs analysts said in a report that the Chinese market is particularly sensitive to prices, and they expect a 10% drop in Shanghai gold prices to increase physical gold demand in China by 16%.

Gold rebounded from March to July, with spot gold prices reaching a historic high of $2483.60 on July 17, fueled by safe haven demand driven by geopolitical and economic uncertainty, as well as continued buying by central banks.

Although the recent price surge has put pressure on cyclical demand, structural changes have kept China's structural gold demand largely unchanged, as the boost to demand from declining confidence and interest rate cuts has largely offset the impact of the downward trend in Gross Domestic Product (GDP) growth, "Goldman Sachs said.

The bank expects huge potential for long positions in gold and reiterates its forecast for gold prices at $2700 per ounce by 2025, due to the central government's firm purchase of gold, possible interest rate cuts by the United States, and geopolitical tensions.

Daily chart of spot gold