#Federal Reserve Policy Meeting##Middle East Situation##Gold Technical Analysis# 24K99 News On Wednesday (July 31), due to dovish comments from the Federal Reserve Chairman Powell, which hit the US dollar and US bond yields, coupled with the rapid escalation of the tension in the Middle East, spot gold closed up by more than 36 US dollars, and the end-of-New-York period gold price once broke through 2450 US dollars/ounce. Product structure, 100-300 billion yuan products operating income of 401/1288/60 million yuan respectively.
Spot gold closed up 36.40 US dollars on Wednesday, up 1.51%, at 2446.91 US dollars/ounce; after the news came out that Iran's leader ordered a direct attack on Israel, gold once soared to 2450.93 US dollars/ounce.
FXStreet analyst Christian Borjon Valencia pointed out that the gold price in North American market ended up significantly after the Federal Reserve decided to maintain interest rates. Federal Reserve Chairman Powell hinted that US employment data will begin to play a key role in formulating monetary policy.
At a news conference, Powell said that the anti-inflation process has expanded and recognized the downward risks in the labor market. Powell added, "We do not believe that the current labor market may be a source of inflationary pressure," and said that if you see the employment market declining, "we should respond."
Powell hints that the earliest fed may cut interest rates in September.
The Federal Reserve ended its two-day monetary policy meeting on Wednesday. The Federal Open Market Committee (FOMC) voted unanimously to keep the benchmark federal funds rate unchanged in the range of 5.25% to 5.5%, and reiterated its intention to lower interest rates after gaining confidence in cooling inflation.
Federal Reserve officials kept interest rates at their highest level in more than 20 years but suggested they are moving towards a rate cut as inflation slows and the labor market cools down.
It is noteworthy that policymakers have made some adjustments to the wording of the rate statement. Previously, the statement only mentioned the focus on inflation risk, while the latest language is to focus on the two-way risks of the dual mission.
In a statement released on Wednesday, the FOMC said, "In recent months, there has been some further progress towards the committee's 2% inflation target. The committee believes that the risks of achieving its employment and inflation goals continue to evolve in a favorable direction."
Officials have also adjusted their assessment of the labor market, pointing out that employment growth has slowed and the unemployment rate has risen but remains low. They said that inflation has eased slightly over the past year but remains slightly higher.
Federal Reserve Chairman Powell said at a news conference that second-quarter inflation data has increased the Fed's confidence and has made "some further progress" in achieving the 2% inflation target. If inflation tests are met, the Fed may cut interest rates as early as September, emphasizing that all Fed decisions are "absolutely" non-political and have nothing to do with the upcoming presidential election.
Powell said the current US economy looks very different from a year ago and is a "historically unusual" and "popular outcome."
He said that Fed members are closely monitoring recent increases in the unemployment rate and possible weaknesses in the labor market, and that as inflation cools, the Fed can more equally balance prices and labor markets. He pointed out that at present, low unemployment and low layoffs indicate that "the labor market is normalizing."
Powell stressed: "Early interest rate cuts may reverse the improvement process of inflation; late interest rate cuts may cause inappropriate weakening of the economy; we will carefully evaluate future decision data; we have not made any decisions about future meetings."
He also said: "Some people today discussed the policy actions (rate cuts) taken at this meeting. But the committee's overall feeling is that if the data supports it, it will take action at the next meeting, not at this meeting. (The Fed) may be the earliest to discuss the issue of lowering the policy interest rate in September. We are approaching the point where it is appropriate to lower policy interest rates, but we have not yet reached that point."
Valencia said that after these remarks, Friday's non-farm payroll report in July will be a key page to solve this puzzle, because the Fed is turning more attention to employment issues. After Powell's speech, market participants expect the Fed to lower interest rates by 70 basis points before the end of the year.
After Powell's press conference, US Treasury yields fell sharply, with the yield on the benchmark 10-year bond falling nearly 8 basis points to 4.066%, weakening the US dollar. The US dollar index tracking the performance of the US dollar against six other currencies fell 0.42% to 104.03.
Mark Malek, chief investment officer of Siebert Next, said that the Fed's statement has not played any role. But from Powell's speech, it can be seen clearly that they have prepared for the interest rate cut in September and they will maintain their choice.
Iran's highest leader ordered a direct attack on Israel
Valencia pointed out that the surge in gold prices is also due to the rise in geopolitical risks after Hezbollah attacked Israel over the weekend. Israel retaliated against Hamas this week and killed the Hamas leader Hania in Iran. According to Capital.com's market analyst Kyle Rodda, gold has been in demand for hedging due to the development of the situation in the Middle East.
The latest report from The New York Times on Wednesday stated that three Iranian officials said that Iran's highest leader, Khamenei, had ordered Iran to directly strike Israel in retaliation for Hamas leader Hania being killed in Tehran. Iran and Hamas accused Israel of assassinating.
According to the report, three Iranian officials, including two Revolutionary Guards members, said that Khamenei issued the order at an emergency meeting of Iran's National Security Council on Wednesday morning local time when Iran had just announced Hania was killed.
In April of this year, Iran launched the largest and most public hostile attack against Israel in decades, firing hundreds of missiles and drones in retaliation for Israel's attack on its embassy district in Damascus, Syria; at the time, this attack resulted in the death of several military commanders in Iran.
On July 31, the Department of Public Relations of the Iranian Islamic Revolutionary Guards announced in a statement that Ismail Haniyeh, the head of the Hamas Political Bureau, and a bodyguard were killed in Tehran, the capital of Iran.
Hamas officials said that the assassination of Hamas leader was a despicable act and would be punished.
Ibrahim Madhoun, an analyst closely related to Hamas, said that the killing of Hamas political leaders shows that there is no red line in the war between Israel and Hamas.
According to Iran's Nour News, the Iranian side stated that Israel's attack was a dangerous gamble, and crossing Iran's red line would make Israel pay a price.
An Iranian Foreign Ministry spokesman stated that the authorities are investigating Israel's attack and that Hania's blood "will not flow in vain".
On the evening of July 30th local time, an Israeli drone attacked a target in the southern suburbs of Beirut, Lebanon, belonging to Hezbollah. The drone fired three missiles, causing a building to collapse.
According to a report by Reuters in the United Kingdom, the Israeli military claimed that it had killed Fuad Shukr, the highest commander of Hezbollah, in an air raid on Beirut on Tuesday, which was a retaliation for a rocket attack across the border three days ago.
How to trade after the surge in gold prices?
FXStreet analyst Christian Borjon Valencia pointed out that according to the daily chart of gold, the upward trend has not changed. As measured by the relative strength index (RSI), momentum favors buyers, but economic news and geopolitical risks may push up gold prices.
Valencia said that if the gold price rises above $2450 per ounce, the next resistance level will be the historical high of $2483 per ounce, followed by the key psychological level of $2500 per ounce.
(Spot gold daily chart source: FXStreet)
On the downside, Valencia added that if the gold price falls below $2400 per ounce, the first key support level is the July 30 low of $2,376 per ounce, followed by the 50-day simple moving average (SMA) of $2359 per ounce. If gold further retreats, the gold price may test the 100-day moving average of $2331 per ounce.