On Tuesday morning (August 20th) in the Asian market, spot gold was still hovering around the 2500 mark, currently trading at around $2503.23 per ounce. Gold prices were suppressed on Monday, and after breaking through $2500 last Friday, they briefly hit a historical high of $2509.96 per ounce at the beginning of trading. Subsequently, investors took profits from the record high and adjusted their positions based on clues from the Federal Reserve and developments in the Middle East. Spot gold closed at $2504.10 per ounce.

David Meger, Director of Alternative Investment and Trading at High Ridge Futures, said, "We wouldn't be surprised if there were some consolidation or pullback in the gold market. If the Federal Reserve only hinted at a possible 25 basis point rate cut without suggesting a potentially larger 50 basis point cut, traders may be disappointed

According to CME FedWatchTool, traders believe that the probability of the Federal Reserve cutting interest rates in September is 100%, with a probability of 77.5% for a 25 basis point rate cut and 22.5% for a 50 basis point rate cut.

The market focus will shift to Wednesday when the Federal Reserve released the minutes of its last policy meeting, and Friday when Chairman Powell delivered a speech at the Jackson Hole Economic Symposium.

Reuters technical analyst Wang Tao believes that gold may fall to the range of $2479-2487 after failing to break through the resistance level of $2507.

However, UBS analyst Giovanni Staunovo stated that gold may further rise in the coming months, potentially reaching $2600 per ounce by the end of the year, and said everyone will be paying attention to any hints from Powell about an immediate interest rate cut.

In terms of physical gold, many banks in major Asian countries have obtained new gold import quotas from their central banks. Despite the repeated record highs in prices, demand is expected to recover.

The US dollar fell to a seven month low on Monday, hitting 101.83, a new low since January 2, closing at 101.86, which still provides support for gold prices. Traders are waiting for Fed Chairman Powell's speech this week, expecting him to signal a rate cut starting in September.

The yield of US treasury bond bonds also fell on Monday. The yield of US 10-year treasury bond bonds fell 2.8 basis points to 3.864% from late Friday. The yield of two-year treasury bond bonds, which often follow interest rate expectations, fell 0.4 basis points to 4.0618%.

The focus of Powell's Jackson Hole speech on Friday is whether he will hint at a possible 25 basis point or 50 basis point rate cut. Last week's data showed that housing inflation was higher than expected in July, and retail sales also performed strongly that month. Since then, the possibility of a significant interest rate cut has decreased.

Another major focus is whether Powell will hint at the possibility of interest rate cuts at every future meeting. But the market may have overestimated the strength and speed of the actions that the Federal Reserve may take.

I believe we are still in a situation where a September rate cut is reasonable, "said Eugene Epstein, North American head of structure at Moneycorp

Epstein said, "Relatively speaking, if one becomes one of the last central banks to initiate a rate cut cycle, but immediately starts cutting interest rates and cuts them by 50 basis points, and then cuts interest rates at every meeting afterwards, it would be a bit excessive

Powell may also be unwilling to make any commitments on details this week, as inflation and employment data for August will be released before the Federal Reserve's September meeting.

In early August, traders aggressively digested the expectation of an immediate interest rate cut, after the unexpected rise in unemployment rate in July raised concerns about the possibility of the economy falling into recession.

According to media reports on Monday, Minneapolis Federal Reserve Chairman Kashkari stated that it is appropriate to discuss the possibility of a September rate cut as the likelihood of a weakened labor market increases.

San Francisco Fed President Daley said in an interview with the Financial Times on Sunday that it is time to consider adjusting the target range for borrowing costs from the current 5.25% -5.5%.

Chicago Fed President Goolsby said on Sunday that credit conditions in the United States are very tight and getting tighter. Although it cannot be certain that the Fed will cut interest rates next month as widely expected, not cutting rates may harm the job market.

In the data to be released on Wednesday, the US government will revise the employment data for the period from April 2023 to March 2024, which may affect Powell's speech on Friday. If the labor situation shown in the data is significantly different from what decision-makers have always believed, it may become a factor driving market trends.

LPL Financial's Chief Global Strategist Quincy Krosby said in Monday's report, "Powell has stated that the Federal Reserve is carefully monitoring whether there are signs of deterioration in the labor market and is ready to intervene if necessary

Krosby said, "If the report shows that the number of jobs created is significantly less than the level initially announced in the monthly report, Powell may emphasize his concerns in his speech

People will also evaluate the minutes of the Federal Reserve's July meeting released on Wednesday to find new clues about its expected interest rate trajectory. Prior to this, there was hardly any data that could divert people's attention. As investors pay 100% attention to the actions to be taken at the September 17-18 meeting, this record will only serve as a rearview mirror.

The World Association of Large Enterprises announced on Monday that its leading economic indicators fell by 0.6% in July. This is worse than the 0.2% decline in June and the 0.3% decline expected by economists. However, this indicator is only secondary data, and treasury bond is in a narrow range.

This Thursday, the initial Purchasing Managers' Index (PMI), July existing home sales, and weekly unemployment claims will also be released, but unless there are major unexpected events, these data are unlikely to affect the market.

Lou Brien, market strategist at DRW Trading, said, "What will be interesting this week will be the minutes of Wednesday's (Federal Reserve) meeting and the revision of the employment benchmark, as well as Powell's speech on Friday morning

FHN Financial macro strategist Will Compernolle said in a client report on Monday, "On the one hand, Powell may only be confirming what almost everyone has already acknowledged: the Federal Reserve will cut interest rates next month. On the other hand, he may also feel that there is no need to confirm this as there are still employment and inflation data to be released before the September 18 decision

The geopolitical situation in the Middle East remains tense and is expected to provide an opportunity for gold prices to further rise.

The Wall Street Journal quoted Arab mediators as saying that Hamas political leader Sinwar believes that the recent round of hostage and ceasefire negotiations is a "bluff" aimed at buying Israel more time to continue military attacks against Hamas. The mediator stated that Sinwar attempted to increase pressure on Israel by expanding the conflict beyond Gaza, including launching attacks from the West Bank. These comments appeared in a report about Hamas and the Palestinian Islamic Jihad (Jihad) claiming responsibility for the Tel Aviv suicide bombing attack.

According to the AXIOS website, Israeli Prime Minister Netanyahu told US Secretary of State Blinken on Monday that he is committed to reaching a Gaza hostage and ceasefire agreement, but Israeli officials have stated that he refuses to give his negotiators enough space to reach an agreement.

Netanyahu's negotiating team reported to him on Sunday that if he is willing to provide more room for maneuver, an agreement may be reached. Two senior Israeli officials said that Netanyahu refused to make concessions and condemned the negotiating team for "yielding". Netanyahu continues to argue that if Israel's stance is firm, Hamas will eventually succumb. The White House had claimed that the negotiations held in Doha last week had made significant progress. Antony Blinken said that Netanyahu had accepted the American proposal, and Hamas was now responsible for agreeing to the ceasefire proposal. This statement has puzzled some Israeli officials, who claim that Netanyahu's hardline approach has actually made it more difficult to reach an agreement. Netanyahu agrees with the US proposal, but he knows Hamas will reject it because it includes several of his latest demands.

According to reports, two security sources stated that Israel launched an attack on a Hezbollah arsenal in the Bekaa Valley in eastern Lebanon on Monday evening. A security source reported that multiple weapons depots belonging to Hezbollah were attacked, with airstrikes targeting four different villages. During the Gaza conflict, Hezbollah and other armed groups in Lebanon have been engaged in firefights with Israel. Israel's airstrikes in the past 10 months have often targeted Hezbollah militants and rocket launch sites, but attacks on military depots are even rarer.

Daily chart of spot gold

It should be noted that on Monday, the candlestick was close to a cross star, and MACD also issued a top divergence signal. If the gold price cannot break the high point this trading day, it will increase the possibility of short-term peak and deep correction in gold price. Pay attention to the support around the 5-day moving average 2483.72 and the 10 day moving average 2460.