On July 17th in the Asian market, gold continued its upward trend, setting a new high from the previous day, currently reported at $2469.85 per ounce. Yesterday, influenced by the dovish expectations of the Federal Reserve, gold surged by more than $40, setting a historical record, closing at $2468.57 per ounce. The yield on U.S. Treasury bonds fell to a four-month low, and the U.S. dollar index continued to decline.

Yesterday, Federal Reserve Governor Kugler, speaking at the National Association for Business Economics symposium, stated that U.S. inflation is returning to the 2% target "cautiously and optimistically." Progress has been made in the inflation of goods, services, and housing, and the confidence of the Federal Reserve has been strengthened, which is a precursor to a rate cut. The job market has seen a "substantial rebalancing," with wage growth slowing and the demand for workers converging with pre-pandemic levels.

Kugler also said: "This ongoing rebalancing indicates that the inflation rate will continue to fall back to our 2% target. If the economic conditions continue to develop in this favorable way, as shown by the inflation data of the past three months, with inflation falling more rapidly and employment softening but remaining resilient, as shown by the past few employment reports, I expect that it will be appropriate to start easing monetary policy later this year."

Like Powell, Kugler refused to comment on the specific timing of the rate cut. The market believes that the Federal Reserve's rate cut will be divided into two steps. At the end of this month's interest rate meeting, the Federal Reserve may set the tone for a rate cut in the interest rate announcement, and then officially cut rates at the meeting on September 17-18.

In the interest rate futures market, the related contracts priced the possibility of the Federal Reserve cutting rates in September at more than 90%. This week, Powell said that the Federal Reserve "does not have to wait until inflation falls to 2%" to start cutting rates. He believes that the recent data has strengthened people's confidence that the inflation rate will fall to the 2% target from the current level, which is about half a percentage point higher.

In terms of data, the so-called "horror data" of the U.S. June retail sales were announced, which was the same as May, both at 0%, but higher than the expected -0.3%. Although the year-on-year growth of 2.3% is eye-catching, compared with the increase of 7.7% in January 2023, it does not lead to the conclusion that consumption is overheating. In addition, from the financial reports of major retailers and manufacturers, the market can see that after a period of high inflation, families are downgrading their consumption.

The data was mainly affected by the sales of new cars and auto parts, which fell by 2% last month, lowering the overall retail level. Due to criminals launching cyber attacks on car dealers across the country in an attempt to extort money, many sales were not completed last month. In addition, due to the decline in oil prices, gasoline revenue also fell by 3%.

However, under the pressure of high interest rates, the U.S. catering industry performed well in June, with a month-on-month increase of 0.3% in sales, and the revised data shows that the catering industry's sales have increased for three consecutive months. Analysis suggests that when the economy is healthy and Americans feel secure in their jobs, the sales of restaurants tend to rise. The sales of online stores also increased significantly for the second consecutive month.

Analysis suggests that despite the resilience of U.S. retail, the expectation of a rate cut by the Federal Reserve in September remains unchanged.

Affected by Kugeler's speech and economic data, the yield on 10-year U.S. Treasury bonds fell to the lowest in four months yesterday. Driven by soft employment data and slowing inflation, the yield on U.S. bonds plummeted this month. The yield on 10-year bonds fell by 6 basis points at the end of Wednesday's trading, reaching the lowest since March 13 at 4.167%.

The three major U.S. stock indexes all closed higher, with the Dow Jones Industrial Average rising by more than 700 points, up 1.85%, the S&P 500 up 0.64%, and the Nasdaq up 0.2%, among which, the Dow Jones and the S&P 500 both set new historical closing highs. Apple continued to set a new historical closing high, with a total market value of $3.6 trillion. Goldman Sachs rose by more than 2%, Berkshire Hathaway rose by more than 1%, both setting new historical highs. Gold stocks rose across the board, with Harmony Gold rising by more than 16%, and Eldorado Gold rising by more than 6%.

European major stock indexes all closed lower, with the German DAX 30 down 0.42%, the UK FTSE 100 down 0.23%, the French CAC 40 down 0.69%, and the Euro Stoxx 50 down 0.67%.

Looking forward to the future of gold, Robert Minter, Director of Investment Strategy at Aberdeen Standard Investments, said that the gold price has managed to stabilize at $2400 per ounce, and now has broken through the top of the two-month consolidation range, with the August gold futures price setting a new historical high of $2470.20 per ounce.

Despite the rising risks, Minter said that the Federal Reserve may still be able to avoid a recession, which is why gold has such great potential: "There are many risks, the Federal Reserve is a bit late, but not fatally late," he said, "This is why there is ample reason to expect a rate cut in September. Because the Federal Reserve is behind, they will eventually step up their pace and try to catch up."

In this environment, Minter said, it is just a matter of time before investor demand will greatly push up the price of gold.