On Wednesday (August 28th), in the morning session of the Asian market, spot gold fluctuated and rose, once again approaching historical highs, currently trading around $2525.35 per ounce. Gold prices rose 0.26% on Tuesday, driven by the weakening of the US dollar, closing at $2524.44 per ounce. The US dollar index hit a new low in over a year, helping gold prices stay above the 2500 mark and rise again. Investors are waiting for inflation data, which may provide clues for the Federal Reserve's interest rate cut next month.

The US dollar index fell 0.3% on Tuesday, hitting its lowest level since July last year at 100.51 and closing at 100.55. The cumulative decline of the US dollar in August was 3.2%, which is expected to record the largest monthly decline since November 2022, making gold more attractive to investors holding other currencies.

Bob Haberkorn, Senior Market Strategist at RJO Futures, said, "The biggest problem now is that the decline in the US dollar we have seen in the past period has given some impetus to gold, and you will see a lot of buying at low levels

Investors are waiting for the release of the Personal Consumption Expenditures (PCE) price index scheduled for Friday, which is a key inflation report and a favored inflation indicator by the Federal Reserve.

Investors expect the Federal Reserve to cut interest rates almost certainly at its September meeting, with the current debate focusing on the possibility of a 50 basis point rate cut rather than a 25 basis point one.

According to the CME FedWatch Tool, traders believe that the likelihood of a 25 basis point rate cut in September is 63.5%, and the likelihood of a 50 basis point rate cut is approximately 36.5%.

The gold price is still above the psychological level of $2500 per ounce, aided by investors' optimism about the upcoming interest rate cut in the United States and lingering concerns about the Middle East conflict, and is poised to achieve its best annual performance since 2020.

According to calculations by the London Stock Exchange Group (LSEG), futures traders expect a cumulative rate cut of approximately 106 basis points in 2024.

Eugene Epstein, the North American head of structured products at Moneycorp in New York, mentioned last week's symposium held by the Kansas City Fed in Jackson Hole, Wyoming, saying, "Since the Jackson Hole meeting, the US dollar has been declining, but I believe it has been more of a sideways consolidation. Fed Chairman Powell's speech was ultimately seen as dovish in all aspects. Non US dollar wealth storage tools have also slightly rebounded. This is considered a follow-up development of dovish sentiment at Friday's Jackson Hole meeting“

After data showed a 0.1% month on month decline in US housing prices in June, the US dollar fell. The year-on-year increase in housing prices in June was 5.1%, the smallest year-on-year increase since July 2023.

Another report on Tuesday showed an increase in consumer confidence in the United States in August. The consumer confidence index of World Enterprise Research rose to 103.3, and the July data was revised up to 101.9. However, the market has little reaction to this data.

Investors are still waiting for the initial value of the US Q2 Gross Domestic Product (GDP) and changes in initial jobless claims.

The gold price is also supported by the tense geopolitical situation. US National Security Council spokesperson Kirby said on Monday that Iran is "prepared and may launch an attack on Israel at any time". If Iran launches an attack, the United States will defend Israel.

Iran's Deputy Defense Minister Qureshi stated that Israel has committed unforgivable crimes when referring to the death of former leader of the Palestinian Islamic Resistance Movement (Hamas), Haniya, in an attack in Tehran. Although Iran believes that war is unacceptable, Iran's response to any attack or threat from the enemy is based on the principles of legitimate rights and deterrence, and Iran will decide the timing and extent of its response to the threat. Qureshi stated that for now, the Israeli regime must continue to be in a state of mental anxiety and panic, and it is certain that Iran's response will be unpredictable.

There is relatively little economic data on this trading day, and investors need to pay attention to geopolitical news and market expectations for the US July PCE data.

Consumer confidence in the United States rose to a six-month high in August, but concerns about the labor market intensified

Consumer confidence in the United States rose to its highest level in six months in August, and people are optimistic about the economic outlook. However, after the unemployment rate rose to a nearly three-year high of 4.3% last month, they are even more concerned about the labor market.

The US Consumer Confidence Index released by the Conference Board on Tuesday was better than expected, reflecting an improvement in views on business conditions over the next six months. The survey suggests that the likelihood of an economic recession continues to decline. The Federal Reserve, like consumers, is also concerned about the labor market, and Chairman Powell hinted last Friday that a rate cut is imminent.

Conrad DeQuadros, Senior Economic Advisor at Brean Capital, said, "This report supports interest rate cuts as inflation expectations have decreased and the labor market has softened, but it is not yet weak enough to suggest that the economy will fall into recession

The Consumer Confidence Index of World Enterprise Research rose to 103.3 in August, the highest level since February. The reading for July was revised up to 101.9.

Economists previously predicted that the reading in August would not change much from the pre July value of 100.3. Consumers aged 35 and above, as well as those with an annual income of over $100000, have strong confidence.

The deadline for the above survey is August 21st. The withdrawal of US President Biden from the presidential race in November and the nomination of Vice President Harris as the Democratic presidential candidate may have boosted public confidence.

The expected index based on consumers' short-term outlook on income, business, and labor market conditions in the survey rose from 81.1 in July to 82.5, exceeding 80 for the second consecutive month. A reading below 80 usually indicates an economic recession.

However, consumers are not so optimistic about the labor market. The proportion of consumers who believe that there are "sufficient" job opportunities has decreased from 33.4% in July to 32.8%. About 16.4% of consumers reported that jobs are "difficult to find", up from 16.3% in July.

The labor market gap based on respondents' perceptions of whether job opportunities are abundant or difficult to find narrowed from 17.1 in July to 16.4, the narrowest since March 2021. This indicator is related to the unemployment rate in the monthly employment report of the Ministry of Labor. The unemployment rate has been rising for four consecutive months.

Consumer 12-month inflation expectations for August fell to 4.9%, the lowest since March 2020, compared to 5.3% in July. The financial market expects that the Federal Reserve will start its easing cycle next month, cutting interest rates by 25 basis points, but does not rule out the possibility of a 50 basis point rate cut.

As employment growth slows down, consumers are becoming more pessimistic about their income prospects for the next six months.

The proportion of consumers expected to see an increase in income decreased from 17.2% in July to 16.9%. The proportion of consumers expecting a decrease in income has increased from 11.6% to 12.7%.

The intensified concerns about the financial situation have affected consumers' purchasing plans for the next six months. On the surface, this suggests that consumer spending will slow down in the coming months, but there is not a strong correlation between confidence and spending.

The planned consumption of cars and major household appliances has decreased. The proportion of consumers planning to buy a house is the lowest since early 2013.

A report released by the Federal Housing Finance Agency (FHFA) on Tuesday showed that single family home prices fell 0.1% month on month in June, and remained flat in May. In June, housing prices increased by 5.1% year-on-year, the smallest increase since July 2023, and in May, they increased by 5.9% year-on-year.

Russia warns the United States not to play with fire, World War III will not be limited to Europe only

Russia stated on Tuesday that the West's consideration of allowing Ukraine to use Western missiles to strike deep into Russia's territory is playing with fire, and warned the United States that World War III will not be limited to Europe.

On August 6th, Ukraine launched an attack on the Kursk region in western Russia and seized a small piece of territory, marking the largest foreign attack on Russia since World War II. Russian President Putin has stated that he will provide a reciprocal response to this attack.

Russian Foreign Minister Lavrov said that the West is trying to escalate the war in Ukraine and considering Ukraine's demands to relax restrictions on the use of foreign weapons is "asking for trouble". Lavrov has been serving as the Russian Foreign Minister for over 20 years.

Since invading Ukraine in 2022, Putin has repeatedly warned of the possibility of a broader war involving the world's nuclear powers, although he has stated that Russia does not want conflict with NATO led by the United States.

Lavrov told reporters in Moscow, "We now confirm once again that it is very dangerous for adult uncles and aunts responsible for managing nuclear weapons in Western countries to play with fire, just like children playing with matches

Lavrov said: "The Americans made it clear in their talks that the Third World War (God forbid) would only affect Europe." Lavrov added that Russia was "clarifying" its nuclear strategy.

Russia's 2020 nuclear strategy sets out when the president will consider using nuclear weapons: generally, as a response to attacks using nuclear weapons or other weapons of mass destruction or conventional weapons when the survival of the country is threatened.

Washington stated that there is no understanding of Ukraine's plans until Ukraine suddenly invades Kursk. The United States also stated that it has nothing to do with this operation.

Russian Foreign Intelligence Chief Sergei Naryshkin said on Tuesday that Moscow does not believe Western claims that it has nothing to do with the Kursk attack. Russian Deputy Foreign Minister Ryabkov stated that the involvement of the United States is an "obvious fact".

Daily chart of spot gold