Increased Volatility After Historic High
On Tuesday, the market swiftly retreated after reaching an all-time high, with the day's movement resembling a "roller coaster." Prices in New York surged to $3674.36 per ounce but fell below the $3630 mark at the close, eventually settling at $3626.13 per ounce. A mild rebound in early Asian trading indicates that investor sentiment remains unstable.
Rate Cut Expectations and Weak Employment as Key Drivers
Since September, asset prices have risen by nearly $200, driven by strong expectations of a Federal Reserve rate cut. The CME FedWatch tool indicates that investors are almost certain of at least a 25-basis-point cut next week, with some betting on a 50-basis-point reduction. An annual revision of employment data slashed nearly a million positions, providing additional momentum to the easing logic.
Dollar and U.S. Bonds Rebound Exert Pressure
However, after reaching record highs, prices came under pressure and retreated. The dollar index rebounded from a seven-week low, and U.S. bond yields also recovered from their lows, reducing the appeal of non-yielding assets. Meanwhile, the U.S. stock market hit new highs, with some funds flowing back into risk assets, weakening safe-haven demand. Some bulls opted for profit-taking, which was a technical factor contributing to the late downturn.
Inflation Data Could Determine Short-term Direction
This week's U.S. inflation data is the market focus. Wednesday’s PPI release and Thursday's CPI will provide fresh direction for investors. If inflation remains moderate, it will strengthen the rate cut logic and boost prices; conversely, if data exceeds expectations, it may force the market to revise rate cut expectations, exerting temporary pressure on the trend.
Long-term Logic Remains Solid
Despite noticeable short-term fluctuations, the long-term structural support remains robust. Continuous buying by central banks, geopolitical uncertainties, and a globally accommodative policy environment are all reducing holding costs and enhancing safe-haven demand. Analysts widely believe that even with prices above the $3600 level, the market still has room to grow.
Volatile Pattern May Persist
Future trends will experience repeated tussles between rate cut expectations and inflation data. In the near term, the market may maintain high volatility, but the long-term trend will continue to be supported by macroeconomic policy and structural demand.
New Highs May Not Be the End
Current volatility does not signify a peak; rather, it is a natural adjustment under the intertwining of policies and data. As Federal Reserve policy signals become clearer, the market may find a new opportunity for a breakthrough, with the historical high being just a stage in a long-term upward trajectory.
