Fed continues to be hawkish, gold continues to fall

Gold prices fell for a fifth straight month, the longest monthly decline since 2018, as the Fed continued to be hawkish, a stronger dollar and the prospect of sharp interest rate hikes by major central banks weighed on sentiment. Investors are reluctant to make big bets on gold. The previously released U.S. consumer confidence data was strong, supporting expectations that the Federal Reserve would raise interest rates by 75 basis points in a row in September. Continued fiery jobs data could revive the dollar's gains, keeping gold's downtrend intact.

Gold’s next target is $1,700, and any rebound attempt will meet new resistance around $1,730. Although gold is seen as an inflation hedge, higher interest rates increase the cost of holding gold, a non-yielding asset.

Investors' exposure to ETFs showed their exposure to gold has fallen as ETF holders have reduced their exposure over the past four months after inflows in the first quarter hit the highest level in six quarters . While last year's net redemptions were driven by long-term holders of gold, the most recent outflows have been dominated by holders who have only established positions in the past two years, suggesting a comparison to traditional ETF investors. , the recent capital inflows have been less invested in gold.

In addition, the market's expectations for the European Central Bank to raise interest rates by 75 basis points in September have further increased, and the pressure on the Bank of England to raise interest rates has further increased. At present, the market expects the Bank of England to raise interest rates by 50 basis points in September, which makes holding non-yielding assets gold The rising opportunity cost of gold makes gold less attractive.

Analysts at Kinesis Money blamed Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole annual meeting on Friday for pushing up U.S. Treasury yields and the U.S. dollar, sending gold continuing its slide. The catalyst for the reversal in gold prices was the Federal Reserve's move to a more hawkish monetary policy in April, which led to a series of rate hikes in recent months and a shrinking of the balance sheet held by the central bank. At present, gold prices have fallen for the fifth consecutive month, the worst performance in four years.

The U.S. is to release seasonally adjusted nonfarm payrolls and the unemployment rate for August. Investment bank forecasts show that major investment banks believe that non-agricultural growth will further decline in August, but there is a large gap in growth expectations among investment banks. Specifically, the U.S. non-agricultural employment growth rate is expected to be between 215,000 and 375,000 after seasonal adjustment in August (the previous value was 528,000), the unemployment rate is expected to be between 3.4% and 3.5% (the previous value was 3.5%), and the annual average hourly wage rate is expected to be Growth is expected to be in the range of 5.2%-5.4% (previously 5.2%).

The strategists at TD Securities noted: “The gold market continues to be characterized by extremely concentrated and inflated positions held by family offices and proprietary trading houses. With prices back to levels seen in the early days of the pandemic, bulls have been massively The risk of capitulation is increasing. This is very much in line with a potential upside risk for the U.S. dollar index, which could coincide with gold falling below $1,675.”