Gold Prices Make A Dramatic Comeback, Both The US Dollar And US Treasury Yields Retreat, The Market Focuses On Friday's Nonfarm Payroll Data!
After several consecutive trading days of intense sell-offs, the gold market finally rebounded on Wednesday. The direct driver of this rebound was the combined pullback of the dollar and U.S. Treasury yields from recent highs.
However, beneath the surface price recovery, gold stands at a crossroads of intense competition among multiple forces. Escalating geopolitical conflicts have pushed up energy prices and strengthened expectations of rate hikes. The probability of a Fed rate hike in September has climbed to 64%, continuously suppressing the non-yielding asset gold; Meanwhile, the upcoming U.S. nonfarm payroll data may become a key catalyst determining the short-term direction of gold prices.
The dollar's strength began with Fed Chair Wash's hawkish speech at the Jackson Hole Global Central Bank Annual Meeting. Wash emphasized that the slowdown in U.S. inflation is not obvious, and policymakers need to ensure inflation returns to the 2% target, a target that remains firm. These remarks caused market expectations for a Fed rate hike in September to jump sharply from about 35% to over 66%, and the dollar index strengthened accordingly.
Meanwhile, U.S. Treasury yields are also experiencing a sharp surge. The 10-year yield climbed about 17 basis points from 4.630% to 4.799% over five consecutive trading days, reaching a three-year high of 4.818% intraday; The 30-year yield surged to a two-week high of 5.296%. The surge in yields was directly driven by inflation concerns triggered by soaring oil prices. The rapid rise in energy prices reignited market worries about persistently high inflation, further strengthening expectations of a Fed rate hike.
However, by Wednesday, the situation had shifted subtly. The ADP National Employment Report showed that private sector jobs increased by only 38,000 in August, below the expected 48,000. This figure, which was below expectations, somewhat eased market concerns that an overheated labor market would force the Fed to aggressively raise rates, which in turn pushed yields back from their highs. The US dollar index also slipped from its three-week high. It was precisely the loosening of the dollar and yields that opened room for a rebound in gold.
Currently, the gold market is in a fierce contest between bulls and bears, with multiple factors intertwining making gold prices highly uncertain. On the negative side, the high expectation of Fed rate hikes is the core pressure. Although ADP data came in short of expectations temporarily easing market concerns, the probability of a rate hike in September remains as high as 64%. However, on the bullish side, the systematic buying of funds driving this round of gold rally is nearing its end, and market selling pressure is on the verge of exhaustion. From a medium- to long-term perspective, the macro narrative logic for gold remains intact. Four major macro narratives—de-dollarization, asset diversification, currency devaluation, and fiscal dominance—continue to ferment.
Market Insight:
Gold's performance will be highly dependent on the U.S. nonfarm payroll report to be released this Friday. If the nonfarm payroll data falls significantly short of expectations, it could further weaken the urgency for the Fed's rate hike in September, providing greater room for gold to rebound. Conversely, if the nonfarm payroll data is strong, it could reinforce rate rate expectations and put pressure on gold prices again.
