Late August is typically when the world’s central banks hold a major annual gathering. The Federal Reserve—the “central bank of the world,” as it is sometimes described—is the central figure at the event, and remarks from the Fed Chair are often viewed as a briefing to central banks around the world on the Fed’s policy path.
At present, the financial market’s primary concern is whether the Federal Reserve will raise interest rates and, if so, when. That is why Fed Chair Kevin Warsh’s hawkish remarks last week had a significant impact on market expectations. The most direct result was that, following Warsh’s speech in Jackson Hole on August 28, 2026, the interest-rate futures-implied probability of a September rate hike rose from approximately 35% the previous day to nearly 60%. A rate hike became the most likely outcome priced by the futures market.
A new round of nonfarm payroll data is due to be released this week. If the data support a rate hike, the probability of an increase could rise further, prompting financial markets in September to price in the hike ahead of time. Investors should therefore pay close attention to the release of the nonfarm payroll figures.
How Should Investors Respond to the Sharp Drop in Gold?
The sharp decline in gold prices was expected. Last week’s article clearly reminded readers to lock in profits. For gold prices to continue rising, the move must be supported by Federal Reserve rate cuts or money printing. Otherwise, the market should be treated as a rebound, with positions opened and closed quickly.
Following the decline in gold prices, short-term traders may try to trade a rebound. The area around 4,450 represents a support level. However, expectations for a rebound should not be too high, and positions should ideally be closed before the nonfarm payroll data are released.
In addition, if this week’s nonfarm payroll data further increase the probability of a rate hike, New York gold prices in September may continue to fall and retest support at 4,000. Short-term traders may wish to pay closer attention to this possibility.
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U.S. Equity Indices Await Payrolls Guidance
The Fed Chair’s remarks shaped rate-hike expectations, prompting interest-rate-sensitive assets to react first. For U.S. equity indices, however, the market is more focused on the actual performance of economic data.
If the nonfarm payroll data increase expectations of a rate hike, they could raise the refinancing costs of AI technology companies and slow the pace of their expansion. This could prompt the market to reassess their valuations, with the adjustment ultimately reflected in the performance of equity indices.
The Nasdaq equity index futures contract is currently still near its 20-week moving average. If it falls further and breaks below the 20-week moving average, the recent optimistic bullish sentiment could change. The index could then enter a phase of adjustment lasting several consecutive weeks or even months, with a decline of between 10% and 20%.
Because the expected decline in the index would not be particularly large, individual stocks could perform quite differently. Fundamentally strong companies such as Nvidia may continue to trade within a range and could reach new highs again once the index bottoms. Other AI-related technology stocks with greater refinancing needs, however, may perform more weakly.
Investors may use any decline to rebalance their portfolios and rotate into other stocks, focusing on companies with stronger advantages and holding them until the index regains strength.
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Last week, following the announcement of the U.S. Treasury’s bond purchases, I hosted a webinar offering my latest analysis of trends in gold, stock indices, and the U.S. dollar. The focus of this live session was how to use correlations between different assets to determine whether the market has shifted from a consolidation phase to a new trend. If you missed the session, you can watch the replay of our video course >>
Trading Strategy Suggestions
U.S. Equity Index Strategy
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U.S. equity indices have historically shown a tendency to reach market turning points in February, May, August, and October. This year, February and May have both already seen interim highs, and the August pullback is consistent with this pattern.
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The Nasdaq and S&P 500 have now reached key support levels, namely the 20-week moving average and the 20-day moving average for S&P futures. A clear rebound has emerged recently, validating the effectiveness of this support.
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If the August correction concludes smoothly, the next key potential market turning point to watch will be October. At that time, the directional outlook should be reassessed based on prevailing market positioning.$标普500(.SPX)$ $标普500ETF(SPY)$ $SP500指数主连 2609(ESmain)$ $微型SP500指数主连 2609(MESmain)$ $纳指100ETF(QQQ)$ $纳斯达克(.IXIC)$ $纳指三倍做多ETF(TQQQ)$ $微型NQ100指数2609(MNQ2609)$ $NQ100指数主连 2609(NQmain)$ $道琼斯(.DJI)$ $道琼斯指数主连 2609(YMmain)$ $微型道琼斯指数主连 2609(MYMmain)$
Gold Strategy
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On July 16, I clearly highlighted a bottoming signal for gold. Gold has since rebounded by approximately 13% in cumulative terms and has now entered a resistance zone around 4,600. Further upside appears limited in the short term.
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Review of the move: Profits from the gold rebound between July and August have already been realized. Investors with existing positions may reasonably lock in gains and need not become overly preoccupied with subsequent short-term fluctuations.
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Gold trading recommendation: Gold is currently in a high-level resistance zone. Investors are not advised to chase the rally. Short-term holders may consider taking profits, while new entry opportunities should be considered only after a clear pullback signal emerges.$黄金主连 2612(GCmain)$ $微黄金主连 2612(MGCmain)$
U.S. Treasury Trading Instrument Recommendation
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CME’s 10-Year U.S. Treasury Note Yield futures offer transparent pricing. Investors do not need to calculate Treasury yields independently, as the contract can be traded directly based on changes in interest rates, resulting in a lower operational threshold.
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Directional reference: If you believe the 10-year U.S. Treasury yield will not break above 5%, you may consider shorting the futures contract. If you believe yields will continue to rise, you may consider going long the contract.
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