Gold trading reminder: Profit-taking caused a sharp correction in gold prices. Is there still a chance to reach the 2,400 mark?

In the early Asian session on Tuesday (July 9), spot gold fluctuated in a narrow range and is currently trading around $2,362.22 per ounce. Gold prices fell more than 1% on Monday to close at $2,358.98 per ounce, essentially giving up all of Friday's gains as risk appetite in the stock market rebounded and investors took profits after a surge in the previous trading day on expectations that the Federal Reserve might cut interest rates in September.

Bob Haberkorn, senior market strategist at RJO Futures, said: "It looks like there is a lot of profit taking, and the stock market is strong this morning, which is competing with precious metals to some extent. However, I believe that gold will rise based on the forecast that the Federal Reserve will cut interest rates. The Fed watch tool predicts a rate cut in September and then possibly another rate cut in November or December, which will be good for gold."

The Nasdaq and S&P 500 indexes in the U.S. stock market hit record highs at one point, and the Dow Jones Industrial Average hit its highest level in more than a month. The market currently expects the probability of the Federal Reserve cutting interest rates in both September and December to be 71%.

Investors this week will focus on Fed Chairman Powell's semi-annual congressional testimony, a series of speeches by Fed officials, and U.S. inflation data to be released on Thursday.

It is reported that the People's Bank of China has suspended its gold reserve increase for two consecutive months in June. This is one of the reasons for the correction in gold prices.

However, the geopolitical situation remains tense, and the market's expectations for the Fed's September rate cut are gradually heating up. It is expected that bargain hunting will provide support for gold prices, and gold prices will still have a chance to test the resistance near the 2,400 mark in the future.

Analyst Sybilla Gross and others said that gold prices fell on Monday after recording the largest weekly increase in three months, and the market focused on the gold purchases of various central banks. In June, the People's Bank of China did not increase its gold holdings for the second consecutive month, but data showed that the Reserve Bank of India and the Central Bank of Poland both increased their gold holdings.

Saxo Bank said in a report: "Gold is erasing some of its gains from last Friday. In the long term, we believe investors will favor gold as uncertainty about the U.S. economy and the unsustainability of the U.S. deficit remain." Federal Reserve Chairman Powell is likely to tell lawmakers in his semi-annual testimony on Tuesday and Wednesday that officials need further confirmation that the economy is cooling before they will cut interest rates.

Wells Fargo analysts Sarah House and Aubrey George said in a report on CPI data to be released on Thursday that the U.S. CPI may stabilize in June but remain on a downward track. They expect a month-on-month increase of 0.1% in June, an acceleration from the flat line in May, and "the decline in gasoline prices will help keep overall price increases moderate." The core index may be significantly lower than the monthly average increase of 0.35% in the first quarter, and is expected to rise 0.24%, while the three-month annualized core CPI will fall to 2.8% from 4.5% in March.

The dollar index rebounded slightly on Monday, focusing on Powell's speech and US CPI data. The dollar rebounded 0.13% from a low in more than three weeks to close at 105.02. The unexpected result of the French election provided the dollar with an opportunity to rebound, but it was still weak overall after Friday's US employment data boosted bets that the Federal Reserve will soon start cutting interest rates. French President Emmanuel Macron asked his prime minister to stay in office temporarily on Monday to wait for difficult negotiations to form a new government after the left-wing camp unexpectedly led in the general election, resulting in a hung parliament. "We are still waiting to see if this coalition can bring together 240 to 250 members of parliament to form a government that I think looks like a workable government in France. We are in a wait-and-see mode," said Garth Appelt, head of foreign exchange and emerging market derivatives for the Americas at Mizuho. Helen Given, a foreign exchange trader at Monex USA, said that some concerns about France's possible exit from the euro zone have also eased after the Euroskeptic Marine Le Pen's National Rally (RN) failed to win a majority in the general election. "If the National Rally wins, there's actually a small risk that France will start to move closer to exiting the eurozone. People are just glad that this problem doesn't exist anymore."

The dollar index fell 0.24% to a more than three-week low on Friday after the June jobs report showed solid job growth that month, but the details of the report drove weakness. Government and health care services accounted for about three-quarters of the overall job gains, and the unemployment rate hit 4.1%, a 2-1/2-year high.

The economy also created 111,000 fewer jobs than previously estimated in April and May, and wages grew at the slowest pace in three years year-on-year.

Traders will be closely watching Federal Reserve Chairman Jerome Powell's testimony to Congress on Tuesday and Wednesday for signs that a rate cut is getting closer. According to CME's FedWatch tool, traders believe there could be two rate cuts this year, with a 76% chance of the Fed's first cut at its September meeting, followed by a December cut.

The main U.S. economic data this week is Thursday's June consumer price data.

Some expect Powell to strike a relatively dovish tone based on recent data, after he said in a speech last week that the U.S. economy is back on track with slowing inflation.

“You’ve seen some not-so-favorable economic data, so I think while he won’t be overly dovish, it will lean more toward dovish in my opinion between the doves and hawks, and then we’ll see what happens with the consumer price index (CPI),” said Tony Farren, managing director of Mischler Financial Group.

A report released by the Federal Reserve Bank of New York on Monday showed that respondents’ one-year inflation expectations were 3% as of June, compared with 3.2% in May.

If the June CPI is in line with expectations, released on Thursday, it could make bond investors more optimistic that the Fed could shift to lower interest rates.

“We expect Chairman Powell to signal that if inflation continues to ease in the coming months, a rate cut could be in the works as early as September,” Lee Hardman, an analyst at MUFG, said in a note. He said if core inflation data softens again in June, the Fed would be on track to start cutting rates. In that case, the dollar could fall in the coming week unless U.S. inflation unexpectedly rises significantly.

Monday's moves in U.S. Treasuries also mirrored those in Europe, with French yields falling to a two-week low after Sunday's election resulted in a hung parliament, easing concerns about a far-right majority.

The 10-year Treasury yield was last at 4.269%, slightly lower than Friday. The two-year yield was at 4.618%, up from 4.599% Friday.

"Some geopolitical risks in Europe have eased, which could help to temporarily curb U.S. yields," said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.

On the other hand, developments surrounding the U.S. election could continue to drive moves in the U.S. government bond market as President Biden faces pressure to withdraw from the re-election campaign.

Biden's poor performance in the first televised presidential debate last month sent long-term Treasury yields higher as investors expect a second Trump presidency to widen fiscal deficits and increase policies that lead to higher inflation.

"Investor reaction to a new Democratic candidate is uncertain and likely depends on the individual," BMO Capital Markets strategists said in a note. "Nevertheless, as recent price action shows, the increased likelihood of Trump returning to the White House has led to a bearish yield curve, suggesting the opposite would be true if the Democratic Party introduces a new contender," they wrote.

In addition, investors still need to pay attention to the support that geopolitical tensions provide to gold prices.

Israel launches a new round of offensive on Gaza, which may endanger ceasefire talks

A new round of Israeli attacks on Gaza on Monday threatened ceasefire talks at a critical moment, Hamas leaders said. Israeli tanks drove into the center of Gaza City after a night of heavy bombing and ordered residents to leave.

Residents said the airstrikes and shelling were the heaviest in the nine-month conflict in Gaza. Thousands of people fled.

The attack came as senior U.S. officials were pushing for a ceasefire in the region. Hamas made major concessions last week. The militant group said the new offensive appeared intended to derail the negotiations and called on mediators to rein in Israeli Prime Minister Benjamin Netanyahu.

Hamas quoted leader Ismail Haniyeh as saying the attack "could bring the negotiation process back to square one. Netanyahu and his army will bear full responsibility for the failure of this path". Residents said neighborhoods in Gaza City were bombarded all night and into the early hours of Monday. They said some multi-story buildings were destroyed.

The Gaza Civil Emergency Service said it believed dozens of people were killed, but emergency teams could not reach them because the offensive was ongoing. Gaza residents said tanks advanced from at least three directions on Monday and reached the center of Gaza City, supported by heavy Israeli air and ground fire.

The Israeli military said militants from Hamas and its ally Islamic Jihad were hiding behind civilian infrastructure to attack Israeli troops. Israel said it had killed more than 30 militants.

Late Monday, Israel issued new evacuation orders for the Sabra, Rimal, Tel Al-Hawa and Daraj areas of Gaza City, asking people to go to Deir al-Balah in central Gaza. The Israeli military said it would open a corridor for civilians to evacuate. The Palestinian Fatah Al-Aqsa Martyrs Brigades said they fired mortar shells at Israeli troops during an attack in southwest Gaza City.

Egypt, Qatar and the United States are stepping up efforts to broker a ceasefire between Israel and Hamas as Israel launches a new round of offensives. Hamas accepted a key part of the US ceasefire proposal last week, leading an official on the Israeli negotiating team to say that the two sides are indeed likely to reach an agreement, and Gaza residents have rekindled their hopes for a ceasefire.

Hamas has abandoned its key demand that Israel first commit to a permanent ceasefire before signing the agreement. An unnamed Hamas source told reporters on Saturday that Hamas said it would allow a permanent ceasefire in the first phase of six-week negotiations. Netanyahu insisted that the agreement could not prevent Israel from resuming fighting until its war goals are achieved. When the war first broke out, he promised to destroy Hamas.

If an agreement is reached, it will jeopardize Netanyahu's ruling coalition, which includes far-right parties that have repeatedly vowed to withdraw from the ruling coalition if Netanyahu ends the war prematurely.

Lebanon-Israel conflict continues, Hezbollah claims to have attacked multiple Israeli military targets.

Lebanon's Hezbollah issued a statement on the 8th local time saying that in response to the Israeli army's attack on its southern towns, its militants fired rockets into the Galilee region in northern Israel and attacked a building used by the Israeli army in the Israeli-controlled Al-Manara area on the temporary border between Lebanon and Israel with appropriate weapons. In addition, Hezbollah militants also shelled the Al-Raheb stronghold on the Israeli side of the temporary border between Lebanon and Israel and hit Israeli targets in Shebaa farms with guided weapons.