On Friday (August 2nd) in the Asian market, spot gold fluctuated narrowly and is currently trading around $2445 per ounce. Gold prices fell back on Thursday after a sustained rebound in the US dollar exchange rate, closing at $2446.20 per ounce. Earlier in the session, it hit a two-week high of $2462.17 per ounce due to expectations of a September interest rate cut and safe haven demand. Currently, the market focus is shifting to the US non farm payroll data to be released this Friday.

The Federal Reserve maintained interest rate stability at its policy meeting on Wednesday, but Chairman Powell stated that if the US economy develops along the expected path, a rate cut could occur as early as September.

Bart Melek, head of commodity strategy at TD Securities, said, "The market has fully digested the possibility that we will cut interest rates in September, and there are people in the market discussing the possibility of the Federal Reserve cutting interest rates by 50 basis points

The weak economic data and dovish remarks made by Federal Reserve Chairman Powell in the previous trading day have consolidated market expectations that the Fed will ultimately cut interest rates next month, with the market heating up its budget for a 50 basis point rate cut in September. The US Treasury yield continued its sharp decline on Thursday, hitting a new low in nearly half a year, helping the gold price to briefly hit a two-week high of $2462.17 per ounce during trading on Thursday.

Data shows that the number of initial jobless claims in the United States rose to the highest level in 11 months last week, indicating a softening of the labor market, although the number of claims often fluctuates at this time of year. In addition, with the decline in new orders, a measure of manufacturing activity in the United States fell to its lowest level in eight months in July.

According to interest rate futures, the market believes that the probability of the Federal Reserve cutting interest rates in September is 100%, and the probability of a 50 basis point rate cut has increased from 9.5% on Thursday to 22%.

At present, traders are waiting for Friday's US employment report to obtain more clues about the Federal Reserve's policy path.

Despite the tense geopolitical situation in the Middle East providing support for gold prices, the US dollar attracted more safe haven funds, helping the US dollar index rebound sharply on Thursday, recovering most of Wednesday's losses and closing at 104.34%, an increase of about 0.28%, which caused gold prices to give up their gains from earlier Thursday.

We are paying attention to the threat of a full-scale conflict in the Middle East, "said Karl Schamotta, Chief Market Strategist at Corpay. This supports the safe haven appeal of the US dollar

Schamotta also said, "Although Powell was extremely dovish at the press conference, the statement issued by the Federal Open Market Committee (FOMC) did sound more balanced

It is worth mentioning that the market still tends to be bullish on gold in the medium to long term, as institutions expect major central banks to continue purchasing gold.

Analysts at Citibank wrote in a report: "Although the People's Bank of Asia, a major Asian country, did not recently 'report' gold purchases in May and June, the central bank's gold purchase demand should remain high in 2024/2025."

The central banks of major Asian countries are the largest official buyers of gold in 2023, but did not purchase gold as reserves for the second consecutive month in June.

In addition to the non farm payroll report, investors need to continue to pay attention to news related to the geopolitical situation and the US election this trading day.

US manufacturing PMI unexpectedly drops to an eight month low of 46.8 in July

As new orders decline, a measure of manufacturing activity in the United States fell to its lowest level in eight months in July, but this is likely to exaggerate the industry's difficulties as factory production rebounded sharply in the second quarter.

The Institute for Supply Management (ISM) announced on Thursday that the Purchasing Managers' Index (PMI) for the US manufacturing industry in July fell from 48.5 in June to 46.8, the lowest since November. A PMI below 50 indicates a contraction in the manufacturing industry, which accounts for 10.3% of the total economy.

Although PMI has declined for the fourth consecutive month, it remains above 42.5, a level that ISM believes typically indicates that the overall economy will gradually expand in the future. Economists had previously predicted that the PMI for July would rise to 48.8.

Although the manufacturing industry has been hit by high interest rates, the situation may not be as severe as implied by business surveys such as ISM. Hard data from the government and the Federal Reserve suggest that the manufacturing industry has stabilized.

The forward-looking new orders sub index in the ISM survey decreased from 49.3 in June to 47.4. The output continues to decline, with the output sub index dropping from 48.5 in June to 45.9. Despite the suppression of orders, manufacturers still face the problem of rising input prices, which may reflect a sharp increase in shipping costs.

The survey shows that the sub index measuring manufacturers' payment prices has increased from 52.1 in June to 52.9. The supplier delivery index rose from 49.8 in June to 52.6. Exceeding 50 indicates a slowdown in delivery speed.

As companies reduce their workforce through layoffs, natural attrition, and hiring freezes, manufacturing employment continues to shrink.

The number of initial jobless claims in the United States rose to the highest level in nearly a year last week

The number of initial jobless claims in the United States rose to its highest level in 11 months last week, indicating a softening of the labor market, despite fluctuations in the number of claims at this time of year.

The report released by the Ministry of Labor on Thursday also showed that the number of unemployed people in mid July increased to the highest level since the end of 2021. This may exacerbate people's concerns about the rapid deterioration of the labor market, as data released last month showed that the unemployment rate rose to 4.1% in June, the highest in two and a half years.

This report supports the expectation of a September interest rate cut, but most economists caution against overinterpreting the increase in the number of applicants. They believe that seasonally adjusting the data is a challenge as car factories suspend production in the summer to restructure equipment.

Federal Reserve Chairman Powell told reporters on Wednesday that although he believes the changes in the labor market are "generally in line with the normalization process," policymakers are "closely monitoring to see if there are signs of more than that.

"Since the implementation of comprehensive control due to the COVID-19 in 2020, the situation of large-scale temporary layoffs in the automotive industry for equipment restructuring has been very different in the past three July," said Stuart Hoffman, senior economic adviser of PNC Financial. From a historical perspective, the labor market is still in a strong state, but not as strong as in 2022 and 2023

As of the week of July 27th, the number of people who initially applied for unemployment benefits from the state government increased by 14000, reaching 249000 after seasonal adjustment, the highest level since August last year. Economists previously predicted that the number of initial jobless claims would be 236000.

Last week, the number of initial unemployment claims exceeded the range of 194000 to 245000 people this year. Excluding seasonal fluctuations, the moving average of the number of applicants in the four weeks increased by 2500 to 238000.

Since June, the number of applicants has been on the rise, partly due to the temporary shutdown and production disruptions caused by Hurricane Beryl, which ravaged Texas. Last week, the number of unadjusted applicants decreased by 10012 to 215827.

From July to the first half of August last year, the number of people applying for unemployment benefits continued to rise, and the trend only completely reversed in early September. Government data released on Tuesday showed that the layoff rate in June fell to its lowest level in over two years.

With the Federal Reserve raising interest rates in 2022 and 2023, demand has been suppressed and recruitment has decreased, leading to a slowdown in the labor market. A report released by global reemployment company Challenger, Gray&Christmas on Thursday showed that the number of planned layoffs by US companies in July decreased by 47% to 258850. However, the planned recruitment for July is only 3676 people.

According to the unemployment benefits report, as of the week ending July 20th, the number of people applying for unemployment benefits, which measures recruitment, increased by 33000, reaching 1.877 million after seasonal adjustment, the highest level since November 2021. This data will not affect the employment report for July as it is not within the survey period.

The US government will release its July employment report on Friday, with an expected increase of 175000 non farm jobs compared to 206000 in June. The unemployment rate is expected to remain unchanged at 4.1%, having risen for three consecutive months.

Continue to receive optimistic news about inflation. The report released by the US Bureau of Labor Statistics on Thursday showed that non farm productivity (a measure of output per worker per hour) grew at an annual rate of 2.3% in the second quarter, compared to a 0.4% increase in the first quarter. Compared to the same period last year, productivity has increased by 2.7%.

After a 3.8% increase in the first quarter, the unit labor cost (the price of labor per unit output) rose by 0.9% in the second quarter. The government reported on Wednesday that the year-on-year increase in labor costs in the second quarter was the smallest in two and a half years. (Done)

US two-year to 10-year treasury bond bond yield fell to a six-month low

The yield of treasury bond bonds fell on Thursday, as weak economic data and dovish remarks made by Federal Reserve Chairman Powell on the previous trading day consolidated the market's expectation that the Federal Reserve will eventually cut interest rates next month, the first rate cut in more than four years.

The yield of two-year to 10-year treasury bond fell to a six-month low below 4%, while the yield of 20-year and 30-year treasury bond fell to the weakest level since March.

Under the geopolitical pressure in the Middle East, treasury bond also benefited from the inflow of safe haven funds. The price of treasury bond is inversely related to the yield.

Kim Rupert, Managing Director of Fixed Income at Action Economics, said, "Not only is the data weak, but we are also seeing some safe haven trades taking place due to the escalating tensions in the Middle East

After the yield fell below 4%, there was also bullish momentum, "she added." To some extent, FOMO (fear of going short) sentiment is too strong, such as locking in a 4% yield and buying before further decline. "

And the Federal Reserve. The Federal Reserve kept its overnight interest rate target range unchanged at 5.25% -5.50% on Wednesday. Chairman Powell opened the door for a September rate cut, pointing out that price pressures in the economy are widely easing and calling it a "quality" inflation decline.

Thursday's data showed that the US manufacturing industry further shrank and construction spending decreased, further consolidating expectations of policy easing in September.

However, Jeff Klingelhofer, Co Head of Investment and Portfolio Manager at Thornburg Investment Management, pointed out that if the market believes that the Federal Reserve will cut interest rates at every future meeting, it is completely wrong.

According to calculations by the London Stock Exchange Group (LSEG), the interest rate futures market expects a rate cut of approximately 75 basis points this year, equivalent to three rate cuts of 25 basis points each. However, the possibility of a 50 basis point rate cut in September that the market is digesting is increasing, rising from 12.5% on Tuesday to the current 19%.

In Thursday's trading, the yield of benchmark 10-year treasury bond fell 12 basis points to 3.985%, the largest one-day decline since mid December. The yield fell to a six-month low of 3.965% during trading.

At the front end of the interest rate curve, the yield of two-year treasury bond reflecting interest rate expectations fell 15.1 basis points to 4.173% on Thursday, having previously fallen to the weakest level since early February. The yield recorded its largest daily decline since December 13th.

Israel claims that Hamas military leader was killed in last month's airstrikes

The Israeli military announced on Thursday that Hamas military leader Mohammed Deif was killed in an Israeli airstrike on Gaza last month, and just the day before (Wednesday, July 31), Hamas political leader Haniyeh was assassinated in Tehran.

Deif is believed to be one of the masterminds behind Hamas' attack on southern Israel on October 7th last year, which sparked the war in Gaza.

The Israeli military announced that on July 13, 2024, Israeli Defense Forces fighter jets attacked the Khan Younis area, and after intelligence assessment, it can be confirmed that Mohammed Deif was killed in the attack

Hamas has neither confirmed nor denied the killing of Deif, but an official Ezzat Rashaq stated that any news regarding the death of its leader is the responsibility of Hamas.

Rashaq said, "Unless they (Hamas' political and military leadership) announce this news, any information released by the media or any other party cannot be confirmed

Israeli Defense Minister Galant stated that Deif's death is a milestone for Israel to achieve its goal of completely eliminating the Hamas military branch, the Kassan Brigade.

Hamas is disintegrating, "Galant said. Hamas terrorists must either surrender or be eliminated

Deif is one of the most important figures in Hamas. He has been with the organization for over 30 years and has been continuously promoted, developing Hamas' tunnel network and bomb making technology.

For decades, he has been Israel's most wanted criminal and has been accused of being responsible for the deaths of dozens of Israelis in suicide bombings. Medical personnel in Gaza said that dozens of Palestinians were also killed in the airstrike that led to his death.

Five sources told the media that senior Iranian officials will meet with representatives of regional allies from Lebanon, Iraq, and Yemen (Yemen) on Thursday to discuss possible retaliatory actions against Israel following the assassination of Hamas leader Haniyeh in Tehran.

Daily chart of spot gold