Gold trading reminder: Powell's words made the market tremble, the price of gold plunged "off a cliff", and attention was paid to the 100-day moving average support

The gold market suffered a "black Wednesday". The spot gold price fell by more than 1.5% in a single day. The intraday low hit $3,268.02/ounce, setting a new low since June 30. The Federal Reserve maintained interest rates unchanged, Powell's hawkish speech to suppress interest rate cut expectations, and the US released more than expected economic data, which together constituted a "perfect storm" for the decline in gold prices. At the same time, the US dollar index rose strongly by about 1% to reach the highest point since May 29 at 99.99, further intensifying the pressure on gold. On Thursday (July 31) in the morning of the Asian market, spot gold rebounded slightly. It is currently trading around $3,281.76/ounce. Investors will also pay attention to the international trade situation and the US June PCE and other data. The non-farm payrolls report will also be released on Friday.

The Federal Reserve's "Eagle Claw" rips apart gold bulls

The Federal Reserve voted 9:2 to keep the federal funds rate unchanged at a range of 4.25% to 4.50% in the July 30 meeting, which was the fifth consecutive time to maintain interest rate stability. However, the negative votes of the two governors in the meeting results became the focus of the market. Bowman, the vice chairperson of financial supervision appointed by Trump, and Waller, the governor, made it clear that they supported a rate cut of 25 basis points, which was not only the most negative votes in more than 30 years, but also reflected the division within the Federal Reserve on the policy path.

Federal Reserve Chairperson Jerome Powell further dashed market expectations for a September rate cut in a subsequent press conference. He made it clear that the Fed had not yet made any decisions on the September meeting and stressed that it would proceed cautiously based on future economic data. Powell also pointed out that downside risks to the labor market were emerging, but controlling inflation remained a core consideration of current policy. This statement quickly cooled market expectations for a September rate cut, with interest rate futures indicating that the probability of a rate cut plummeted to 45% from 65% the day before.

Tai Wong, an independent metals trader, commented: "Powell's focus on inflation control over employment issues has weighed on the gold market." The hawkish stance has not only undermined gold's appeal as a safe-haven asset, but also pushed up the dollar and US Treasury yields, putting additional downward pressure on gold prices.

US economic data "combination punch" hits gold prices hard

In addition to the hawkish stance of the Federal Reserve, the US economic data released on the same day also gave gold bulls a blow. The ADP employment report showed that private employment rose more than expected in July, indicating that the labor market remains resilient. More strikingly, the second-quarter GDP growth rate of 3.0% month-on-month, far exceeding the expected 2.4%, and swept away the haze of a 0.5% contraction in Quarter 1.

Although economists point out that there is "moisture" in the data - falling imports contributed to the main growth and domestic demand growth was at a two-and-a-half year low. But it is undeniable that the overall picture of the economy painted by the data undermines market expectations of imminent easing by the Federal Reserve. Standard Chartered analyst Steve Englander's comment is representative: "When averaging the two quarters, 1.5% growth is only mediocre." But the market tends to pay more attention to the fluctuations in single-quarter data, which directly led to the sell-off of gold.

Dollar and Treasury Yields: Gold's Natural Enemy Returns Strong

The strong performance of the dollar index became the immediate factor that overwhelmed gold. On July 30, the dollar index rose more than 1% to hit a high of 99.98, the highest since May 29, and the cumulative gain in July was more than 3%. The rise of the dollar is closely related to the Federal Reserve's decision to maintain high interest rates, but also driven by better-than-expected US economic data. Uto Shinohara, senior investment strategist at Mesirow Currency Management, said: "The dollar is well supported on the back of strong data and Fed statements." The strength of the dollar directly undermines the attractiveness of dollar-denominated gold, especially for investors holding other currencies, the purchase cost of gold has risen significantly.

Meanwhile, the rise in US Treasury yields added to the pressure on gold prices. The yield on the 10-year Treasury rose 4.4 basis points to 4.372 per cent in late trading, while the yield on the two-year Treasury, which is closely tied to interest rate expectations, rose 5.7 basis points to 3.932 per cent. The rise in Treasury yields reflects the market's expectation that the Federal Reserve will maintain high interest rates, which has a direct impact on non-yielding assets such as gold. Gold's attractiveness as a safe haven asset is often more pronounced in a low interest rate environment, while a high yield environment weakens its investment value.

Global Macro Environment: The Complex Impact of Trade Frictions and Geopolitics

Changes in the global macro environment have added more uncertainty to the gold market, with the Trump administration's recent moves on trade policy, including trade deals with Japan, the European Union and South Korea, and steep tariffs on India and Brazil.

While these policies have eased investors' concerns about the US withdrawal from global affairs and boosted confidence in the dollar, the progress of Sino-US trade talks and Mr. Trump's tariffs on countries such as India and Brazil have added to global economic uncertainty. This uncertainty is usually good for gold, but in the short term the strength of the dollar and the hawkish stance of the Federal Reserve have clearly dominated.

In addition, the Bank of Japan's monetary policy moves are also in the spotlight. The remarks of Kazuo Ueda, the governor of the Bank of Japan, could bring new volatility to the yen's movement and global foreign exchange markets.

Gold market outlook: opportunities in a correction?

Although gold prices have been hit hard in the short term, market analysts remain cautiously optimistic about the long-term outlook for gold. Tai Wong pointed out that while gold prices may face a deeper correction, the core logic of the gold market - global economic uncertainty, high US debt and the trend of de-dollarization - still holds true. These factors may attract buyers to the bottom of the range when gold prices fall. The current gold price has hit a low near $3,268/oz, close to the key technical support level of the 100-day moving average (currently around 3,267), and may continue to be under pressure in the short term, but long-term investors may see the pullback as a buying opportunity.

From a technical point of view, after the price of gold falls below $3,300/ounce, the short-term target is likely to be around $3,250/ounce (the low on June 30 was $3247.87/ounce). If further downward, $3,200/ounce will be a key psychological level. Conversely, if the Federal Reserve releases a clearer interest rate cut signal in the future, or global geopolitical risks further increase, gold prices may quickly rebound and return to above $3,300/ounce.

(Daily chart of spot gold, source: Internet)

At 07:51 Beijing time, spot gold was quoted at $3282.90 per ounce.