On Wednesday (July 31), due to dovish remarks by Federal Reserve Chairman Powell hitting the US dollar and bond yields, coupled with rapidly escalating tensions in the Middle East, spot gold closed up more than $36, with gold prices briefly breaking through $2450 per ounce at the end of the New York session.

Spot gold surged $36.40, or 1.51%, to close at $2446.91 per ounce on Wednesday; After the news of Iranian leaders ordering a direct attack on Israel came out, gold prices soared to $2450.93 per ounce.

Analyst Christian Borjon Valencia pointed out that after the Federal Reserve decided to keep interest rates unchanged, gold prices in the North American market rose sharply in late trading on Wednesday. Federal Reserve Chairman Powell hinted that US employment data will begin to play a key role in formulating monetary policy.

Powell stated at a press conference that the anti inflation process has "expanded" and recognized the downside risks in the labor market. Powell added, "We do not believe that the current labor market may be a source of inflationary pressure," and he said that if we see a decline in the job market, "we should respond

Powell hints at Fed cutting interest rate as early as September

The Federal Reserve ended its two-day monetary policy meeting on Wednesday. The Federal Open Market Committee (FOMC) unanimously voted to keep the benchmark federal funds rate unchanged in the range of 5.25% to 5.5%, and reiterated its intention to lower rates once confidence in inflation cools down.

Federal Reserve officials have kept interest rates unchanged at their highest level in over 20 years, but hinted that they are moving towards a rate cut as inflation slows and the labor market cools.

It is worth noting that policy makers have made some adjustments to the wording of interest rate statements. The previous statement only mentioned focusing on inflation risks, but the latest wording focuses on the two-way risks of dual missions.

In a statement released on Wednesday, the FOMC stated, "In recent months, some further progress has been made towards the committee's 2% inflation target. The committee believes that the risks of achieving employment and inflation targets continue to move towards a better balance

Officials also adjusted their assessment of the labor market, pointing out that employment growth has slowed down and the unemployment rate has increased but remains low. They stated that the inflation rate has eased over the past year, but remains at a slightly higher level.

Federal Reserve Chairman Powell stated at a press conference that the second quarter inflation data has increased the Fed's confidence and made "some further progress" towards achieving its 2% inflation target. If the inflation test is met, the Fed may cut interest rates as early as September, and emphasized that all decisions made by the Fed are "absolutely" non political and unrelated to the upcoming presidential election.

Powell said that the current economy in the United States looks completely different from a year ago. He described the current economy as an "unusual" and "popular outcome in history".

He stated that members of the Federal Reserve are closely monitoring the recent rise in unemployment rates and potential weakness in the labor market, and as inflation cools down, the Fed is able to balance prices and the labor market more equally. He pointed out that currently, low unemployment rates and low levels of layoffs indicate that the labor market is normalizing.

Powell emphasized, "Cutting interest rates too early may reverse the process of improving inflation; cutting interest rates too late may cause undue weakening to the economy; we will carefully evaluate future decision data; and we have not made any decisions on future meetings

He also said, "Some people discussed the possibility of taking policy action (interest rate cuts) at this meeting today. But the overall feeling of the committee is that if the data supports it, we will take action at the next meeting, not at this meeting. (The Federal Reserve) may discuss the issue of lowering policy rates as early as the next meeting in September. We are approaching the point of appropriately lowering policy rates, but we have not yet reached that point

Valencia said that after these remarks, Friday's July non farm payroll report will be a key page in unraveling this puzzle, as the Federal Reserve is shifting its focus to employment issues. After Powell's speech, market participants expect the Federal Reserve to cut interest rates by 70 basis points before the end of the year.

After Powell's press conference, the yield of US treasury bond bonds dropped sharply. The interest rate of US 10-year benchmark bonds was 4.066%, down nearly 8 basis points, weakening the US dollar. The US dollar index, which tracks the performance of the US dollar against six other currencies, fell 0.42% to 104.03.

Siebert Next Chief Investment Officer Mark Malek stated that the Fed's statement had no effect at all. But it is clear from Powell's speech that they are prepared for a rate cut in September and will maintain their own choice.

Iran's Supreme Leader Orders Direct Attack on Israel

Valencia pointed out that the sharp rise in gold prices is also attributed to the increased geopolitical risks after Hezbollah's weekend attack on Israel. Israel retaliated against Israel this week by killing Hamas leader Haniya in Iran. According to Capital.com market analyst Kyle Rodda, gold has always had a safe haven demand due to the development of the Middle East situation.

The New York Times reported on Wednesday that three Iranian officials have stated that Iran's Supreme Leader Khamenei has ordered Iran to directly strike Israel in retaliation for the killing of Hamas leader Haniyeh in Tehran. Iran and Hamas accuse Israel of carrying out assassinations.

The report pointed out that three Iranian officials, including two members of the Revolutionary Guard Corps, said that Khamenei issued the order at an emergency meeting of Iran's Supreme National Security Council on Wednesday morning local time, when Iran had just announced that Haniyeh had been killed.

In April of this year, Iran launched its largest and most public hostile attack on Israel in decades, launching hundreds of missiles and drones in retaliation for Israel's attack on its embassy complex in Damascus, Syria; At that time, the attack resulted in the deaths of several Iranian military commanders.

On July 31st, the Public Relations Department of the Islamic Revolutionary Guard Corps of Iran announced in a statement that Ismail Haniyeh, the leader of the Hamas Politburo, and a bodyguard were killed in an attack in the Iranian capital Tehran.

Hamas officials have stated that the assassination of Hamas leaders is a despicable act and will be punished.

Ibrahim Madhoun, an analyst closely related to Hamas, said that the killing of Hamas' political leader indicates that there is no red line in the war between Israel and Hamas.

According to Nour News, Iran claims that the Israeli attack is a dangerous gamble and crossing Iran's red line will cost Israel.

The spokesperson of the Iranian Ministry of Foreign Affairs stated that authorities are investigating the Israeli attack and that the blood of Haniyeh will never be shed in vain.

On the evening of July 30th local time, an Israeli drone attacked a target of Hezbollah in the southern suburbs of Beirut, the capital of Lebanon. It is reported that the drone launched three missiles, causing a building to collapse.

Reuters reported that the Israeli military claimed to have killed Hezbollah's top commander Fuad Shukr in an airstrike on Beirut on Tuesday, in retaliation for a cross-border rocket attack that occurred three days ago.

How to trade after the sharp rise in gold prices?

Analyst Christian Borjon Valencia pointed out that according to the daily gold chart, the upward trend has not changed. Measured by the Relative Strength Index (RSI), momentum is favorable for buyers, but economic news and geopolitical risks may push up gold prices.

Valencia stated that if gold prices climb above $2450 per ounce, the next resistance level will be the historical high of $2483 per ounce, followed by the $2500 per ounce mark.

On the downside, Valencia added that if the gold price falls below $2400 per ounce, the first key support level will be at the July 30th low of $2376 per ounce, followed by the 50 day simple moving average (SMA) of $2359 per ounce. If gold further rebounds, the price of gold may drop below the 100 day moving average of $2331 per ounce.