The precious metals market saw an intraday surge and retreat, driven by short-term profit-taking from bullish investors. Gold futures for October 2024 on the Shanghai Futures Exchange (SHFE) closed 0.62% higher at 949.94 yuan per gram, while silver futures for the same month gained 1.02% to close at 15,748 yuan per kilogram.
On the economic data front, the US July non-farm payrolls report unexpectedly turned negative, with prior months' figures revised significantly lower. The labor force participation rate also declined, compressing the probability of a September rate hike to around 40%. Divergence among Federal Reserve officials has widened. New York Fed President John Williams stated he would resolutely raise rates if inflation does not recede, underscoring the persistently high uncertainty in the policy path.
Negotiations between the US and Iran remain volatile. The US side indicated it is close to reaching an interim agreement, but Iran has denied this, suggesting the probability of a substantive deal is low. A pattern of "talking while fighting" is likely to persist throughout the year. On the investment demand side, net holdings of gold ETFs have recovered by approximately 20 tonnes from recent lows. The People's Bank of China added 640,000 ounces of gold in July, marking its 21st consecutive month of purchases and the fifth consecutive month of increasing its buying volume. Central banks globally purchased a record 289 tonnes of gold in the second quarter.
The market's trading logic has decoupled from US-Iran dynamics and is now centered on betting around the trajectory of interest rate hikes. Previously, the probability of a September rate hike had risen due to economic resilience and persistent inflation. However, the retreat of the AI trade and the weakening non-farm payrolls data have disrupted the rate hike pricing. Short-term US Treasury yields and the US dollar have weakened in tandem. Ongoing central bank gold purchases and stabilizing ETF holdings provide strong support for gold prices.
Looking ahead, short-term uncertainty remains. If inflation fails to decline smoothly, elevated long-end interest rates will limit the upside for precious metals. After surpassing its previous high, London gold is expected to find solid support in the $4,150-$4,200 per ounce range. The strategy recommendation is to build long positions on dips while strictly controlling risk.
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