On Monday (August 12th) morning trading in the Asian market, spot gold fluctuated narrowly and is currently trading around $2430 per ounce. After a significant increase last Thursday, gold prices remained stable on Friday, closing at $2430.92 per ounce. Investors' confidence in the Federal Reserve's interest rate cut in September has increased, and US bond yields fell last Friday, providing some support for gold prices. The market will also pay attention to the upcoming US CPI data this week.

In addition, the tense geopolitical situation in the Middle East also provides safe haven support for gold prices. Iran's acting foreign minister said on Sunday (August 11) that "legitimate and decisive actions will be taken against Israel".

However, last week the gold price fell by 0.6%. Under the influence of investor liquidation and widespread stock market sell-off, gold prices plummeted by 3% last Monday.

OANDA market analyst Zain Vawda said, "In the medium term, the outlook for gold remains optimistic, and any decline could be short-lived given potential macroeconomic factors. The US unemployment data on August 8th eased concerns about an economic recession and boosted gold prices. In addition, statements from Federal Reserve decision-makers this week also support the view that interest rates may be cut soon

The US dollar index fell 0.1% last Friday, making gold more attractive to investors holding other currencies. Yields on 10-year US treasury bond bonds also fell. Last week, the market was greatly affected by concerns about the US economic outlook, and investors turned their attention to the key inflation data on August 14th in search of new clues about the potential magnitude of the September interest rate cut.

The market expects the annual growth rate of US CPI in July to be 2.9%, slightly lower than the previous month's 3.0%. However, the month on month growth rate is expected to accelerate from -0.1% to 0.2%. The expected year-on-year growth rate of core CPI will decrease from 3.3% to 3.2%, but the month on month growth rate will increase from 0.1% to 0.2%.

Federal Reserve policymakers are increasingly convinced that the degree of inflation cooling is sufficient to allow for interest rate cuts. They will obtain clues about the magnitude and timing of interest rate cuts from economic data, rather than stock market volatility.

At the beginning of the month, the main theme of the bond market was concerns about the labor market conditions and the future path of the Federal Reserve, "said Lou Brien, a market strategist at DRW Trading in Chicago." Then, due to yen arbitrage trading, there was a lot of noise added to the market

This transaction involves borrowing Japanese yen at low cost to provide funds for purchasing US assets, including technology stocks. However, the significant rise of the Japanese yen against the US dollar prompted traders to close these positions.

The yield of interest rate sensitive two-year treasury bond rose 1.1 basis points last week to 4.055%, up 18 basis points last week, the largest weekly increase since March.

The yield of 10-year treasury bond fell 5.3 basis points to 3.944% on Friday, and rose 15 basis points last week, the largest weekly increase since April.

It is expected that the Federal Reserve will cut interest rates at its next policy meeting on September 17-18, but traders are struggling with whether a 25 basis point or 50 basis point rate cut is more likely.

Stephen Gola, head of US treasury bond sales and trading at StoneX Group, said that the market may have overestimated the possibility of cutting interest rates by 50 basis points.

The Federal Reserve has always been very cautious and slow-moving, trying to adhere to its policy tenet that monetary policy has long-term and variable lag, "he said." Acting quickly when needed, but beyond that, we do live in a world of 25 basis point increments and have not collapsed

According to the CME FedWatch Tool, traders currently believe that the probability of a 50 basis point rate cut is 48.5%, and the probability of a 25 basis point rate cut is 51.5%. Last Monday, the market fully digested that the Federal Reserve would cut interest rates by 50 basis points, and traders began to speculate that the Fed may urgently cut interest rates before September.

However, Federal Reserve policymakers stated last Thursday that they are increasingly confident that inflation will cool enough to allow for interest rate cuts, and they will obtain clues about the size and timing of rate cuts from economic data rather than from stock market turbulence.

Zachary Griffiths, Senior Investment Grade Strategist at CreditSights, said, "If anything goes wrong with the US CPI data, I'm worried it will be an overall data shock, but our basic expectation is that inflation is falling. The economy is slowing down because consumer momentum is running out, excess savings are running out, and we're starting to see an increase in unemployment, which should affect spending and inflation data

Assuming inflation does not unexpectedly rise, employment data, especially the unemployment rate, may still be the focus of traders' attention.

Concerns about the labor market conditions and the pace of Federal Reserve actions still exist and will become more apparent in the coming weeks, "said Brien from DRW. Many components of the labor market have been weakening for a considerable period of time and will continue to weaken

Federal Reserve Chairman Powell's speech at the Jackson Hole Economic Policy Symposium on August 22-24 may also provide new clues for the path of interest rate cuts.

The market experienced a chaotic week last week, largely due to unexpectedly weak US employment data in early August causing a global stock market crash, while demand for safe assets such as the Japanese yen and Swiss franc surged these currencies to their highest point since the beginning of the year on Monday.

Investors also need to closely monitor relevant news on the geopolitical situation in the Middle East.

On the 8th, Hezbollah militants in Lebanon claimed to have attacked Israel's "Iron Dome" system launch platform using rockets, heavy artillery shells, and other means. The Israeli military claimed to have shelled rocket launchers in the direction of Lebanon. On the early morning of the 8th to 9th, the Israeli army launched airstrikes on Hezbollah militants and military buildings in many areas of southern Lebanon.

The Hezbollah armed group in Lebanon issued a statement late on the night of the 9th local time, stating that the group launched a total of 9 operations against Israeli military targets that day. The statement stated that the armed group launched multiple rockets at the Israeli 769th Brigade headquarters located in Shimona, northern Israel, and used a large number of drones to attack the Israeli coastal camp headquarters in Liman, northwestern Israel. On the evening of the 9th, the Israeli Defense Forces announced that they had struck a Hezbollah armed launch device in Hamam, southern Lebanon, which was loaded with ready to fire rockets. In addition, the Israeli army also carried out airstrikes and shelled Hezbollah armed facilities located in multiple areas of southern Lebanon.

On August 10th local time, air raid sirens sounded in many areas of northern Israel. The Israeli Defense Forces confirmed that more than 10 rockets were launched from southern Lebanon to northern Israel that evening, and all rockets landed in open areas without causing any casualties. The Israeli military subsequently shelled the areas related to rocket launches within Lebanon.

According to local media reports on the 9th, multiple informed officials have stated that due to the escalating tensions between Israel and Iran, the United States will allocate $3.5 billion to Israel for the purchase of American made weapons and military equipment.

According to the Wall Street Journal on the 9th local time, citing US officials, the United States has warned Iran that if Iran launches a large-scale attack on Israel, the Iranian government and economy may suffer devastating blows. The official stated that the United States has sent a clear message to Iran that if they launch a major retaliatory attack against Israel, the risk of escalation will be very high. If Iran launches a large-scale attack on Israel, the stability of the Iranian economy and government will face serious risks. The United States has directly or through intermediaries conveyed this warning to Iran, but has not provided specific details. At present, Iran has not responded to this.

On the 10th local time, according to the official Palestinian news agency WAFA and Al Jazeera, the Israeli army bombed a school in the Gaza Strip, resulting in over 100 Palestinian deaths and dozens of injuries. It is reported that the school provides shelter for displaced persons.

On Sunday (August 11th), Iran's acting foreign minister stated that "legitimate and decisive actions will be taken against Israel".

According to AXIOS citing two sources, the latest assessment from the Israeli intelligence community is that Iran has decided to directly attack Israel in retaliation for the assassination of Hamas political leader Haniyeh. And it may launch an attack within a few days, and even take action before the Gaza hostage negotiations on August 15th.

In addition, Hamas stated in a statement that it has expressed its position to mediators such as Egypt, Qatar, and the United States, requesting them to propose a negotiation plan for the exchange of detained persons and a ceasefire agreement based on the agreement reached on July 2 this year and relevant Security Council resolutions, rather than restarting new negotiations. The statement also emphasized that Hamas has provided "all necessary flexibility and initiative" for the negotiations to proceed.

On this trading day, the US Federal Reserve's one-year inflation forecast for July in New York will be released, and investors need to pay attention. In addition, former US President Trump received a heavyweight interview with Tesla CEO Elon Musk, and investors also need to pay attention.