Gold trading reminder: Trump was shot! The US dollar is supported, beware of the gold short counterattack

In the early Asian session, spot gold fluctuated slightly and is currently trading around $2,407.60/oz. As former US President Trump was shot in the right ear at a campaign rally last Saturday, increasing the possibility of him regaining the White House throne, the market expects that betting on his victory will increase in the next week, which provides support for the US dollar index and puts gold prices under slight pressure.

The US dollar index opened higher on Monday and is currently trading around 104.29, up about 0.18%, and hit 104.32 earlier.

Gold prices remained above the key level of $2,400 per ounce on Friday, closing at $2,411.33/ounce, and rose for the third consecutive week, as investors became increasingly confident that the Federal Reserve would cut interest rates after the unexpectedly weak US CPI data, although the PPI data remained strong and failed to change the general expectation of a rate cut in September.

Last Thursday, gold prices rose to their highest point since May 22 at $2,424.42/ounce after US consumer prices unexpectedly fell. The data reinforces the view that the downward trend in inflation has resumed and raises hopes for a rate cut by the Federal Reserve.

"We are seeing some profit-taking pressure, a routine corrective pullback after a solid rise," said Jim Wyckoff, senior market analyst at Kitco Metals. "The latest producer price index (PPI) report was hotter than expected, which added some selling pressure."

The modest growth in U.S. producer prices in June further confirms that inflation has resumed its downward trend and strengthens the case for a rate cut in September.

According to the CME FedWatch tool, the market currently sees a 94.4% chance of a rate cut in September.

The survey shows that Wall Street analysts and retail investors are generally optimistic about the future direction of gold prices. Of the 13 Wall Street analysts participating in the survey, 12 (92%) expect gold prices to continue to rise in the coming week, and only one analyst (8%) predicts that gold prices will fall. Of the 178 retail investors who participated in the online survey, 67% are bullish, 18% are bearish, and the remaining 15% expect gold prices to move sideways.

China's second-quarter GDP and other data will be released this trading day. Investors need to pay attention to them, pay attention to the changes in market sentiment after Trump's attack, pay attention to the July New York Fed manufacturing index, and pay attention to the speeches of Fed officials.

This week, focus on the US June retail sales monthly rate (released on Tuesday, July 16) and the ECB interest rate decision, pay attention to the speeches of several Fed officials, pay attention to news related to the geopolitical situation and news related to the US election.

The US PPI report shows that inflationary pressures have eased, and interest rate cuts are expected in September

The increase in US producer prices in June was slightly higher than expected due to rising service costs, but this did not change expectations that the Fed may start to cut interest rates in September.

In the June producer price report, some details used to calculate the components of the Fed's preferred inflation indicators (especially health care services) were mostly favorable. The Fed tracks the personal consumption expenditures (PCE) price index to assess the achievement of inflation targets.

Given the weakening of some data in the consumer price report, economists expect the PCE inflation indicator to be moderate in June.

"There doesn't seem to be much inflationary pressure at the factory, which could feed into the prices consumers pay at stores and malls," said Christopher Rupkey, chief economist at FWDBONDS.

The Bureau of Labor Statistics said Friday that the producer price index for final demand rose 0.2% in June from the previous month after being flat in May. Economists had forecast a slight increase of 0.1% in the PPI.

The PPI rose 2.6% in June from a year earlier, the largest year-over-year gain since March 2023, after increasing 2.4% in May.

The PPI's rise was driven by a 0.6% rise in service prices. Service prices rose 0.3% in May.

Portfolio management fees rebounded 1.0% after falling 0.8% in May. Airline fares rose 1.1%, continuing a 3.9% decline in May. Hotel and motel accommodations fell 0.2%. The series used to calculate personal consumption expenditures for health care services was even more modest. The cost of physician services fell 0.4%.

"The biggest news is that the PPI hospital price index increased just 0.1% in June after our own seasonal adjustment, with a sharp increase of 1.3% in May revised down to 0.6%.

Portfolio management fees, health care, hotel and motel accommodations, and airfares are all components of the PCE price index calculation.

The market expects the PCE price index to rise slightly by 0.1% month-on-month in June, compared with a flat reading in May. The core PCE price index is expected to rise 0.15% month-on-month, compared with a 0.1% increase in May. Both PCE and core PCE are expected to rise 2.5% year-on-year, compared with a 2.6% increase in May.

Given the downward revision to the PPI hospital price index, economists expect May's monthly and annual inflation data to be revised down.

"The slowdown in inflation over the past two months has returned to normal," said Stephen, an economist at Bank of America Securities. Juneau said.

In addition to slowing inflation, the labor market is also losing momentum. The unemployment rate climbed to 4.1% in June, a 2-1/2-year high. With the Fed now wary of labor market weakness, economists and financial markets are increasingly betting on a rate cut in September and another in December.

Federal Reserve Chairman Jerome Powell acknowledged the improving inflation environment in his testimony to Congress last week, but also highlighted risks in the labor market, saying "we have seen a fair amount of slack."

Wholesale commodity prices fell 0.5% in June after falling 0.8% from the previous month in May, suggesting that rising transportation costs had no impact. Falling prices for energy products held down wholesale prices, with gasoline prices falling 5.8% after falling 7.3% in May.

Food prices fell 0.3% in June after being flat in May. Egg prices rebounded 55.9% after a 34.8% plunge in May.

Excluding food and energy, commodity prices were flat in June after rising 0.2% in May. The core PPI, which excludes food, energy and trade services, was flat in June, the lowest since May 2023, after rising 0.2% in May. The core PPI rose 3.1% year-on-year, after rising 3.3% in May.

"Compared with the past few years, businesses are much more limited in their ability to pass on input costs to consumers, and higher input costs may at best prevent prices from falling more," said Veronica Clark, an economist at Citigroup.

The University of Michigan's consumer survey showed that the initial one-year inflation expectations fell from 3.0% in June to 2.9% in July. Five-year inflation expectations also fell from 3.0% in June to 2.9%.

"Combined with the decline in actual inflation, this paves the way for rate cuts starting in September," said Michael Pearce, deputy chief U.S. economist at Oxford Economics. ”

Trump attacked at campaign event, betting on his victory expected to surge

Several investors said on Sunday (July 14) that the shooting at a campaign rally of former US President Trump on Saturday increased the possibility of him regaining the White House throne, and betting on his victory will increase in the coming week.

Trump was shot in the ear at a rally in Pennsylvania on Saturday (July 14), and authorities believe it was an assassination attempt. Trump, with blood on his face, waved his fist after the attack, and his campaign team said he was fine after the incident.

Rong Ren Goh, portfolio manager of the fixed income team of Eastspring Investments in Singapore, said that before the shooting, the market reacted to the prospect of Trump's presidency by pushing up the dollar and positioning for a steeper U.S. Treasury yield curve, and these trades may become more active in the coming week.

Trump's shooting is the largest since Republican President Ronald Reagan in 1981. The first time a U.S. president or a major party candidate has been shot since the assassination attempt on Reagan, could affect the Nov. 5 presidential rematch between Trump and Biden, who have been battling in polls for some time.

"It's very likely that there will be a landslide victory in the election. This could reduce uncertainty," said Nick Ferres, chief investment officer at Vantage Point Asset Management, noting a sharp rise in polls after the 1981 assassination attempt on Reagan.

World leaders and U.S. politicians condemned the shooting, while some industry executives, including Tesla CEO Elon Musk, announced their support for Trump.

Biden's poor performance against Trump in the presidential debate two weeks ago has led to growing doubts among donors, supporters and fellow Democrats about his ability to defeat Trump and fulfill his presidency.

Immigration and the economy have been major issues for U.S. voters, who see Trump as the better candidate on economic issues, according to a Reuters/Ipsos poll, even as Biden's White House seeks to benefit from a solid economy with slowing inflation and low unemployment.

Market analysts expect Trump to After taking office, he will adopt a more hawkish trade policy, reduce regulations and relax climate change regulations. Investors also expect corporate and individual tax cuts that expire next year to be extended, which has exacerbated concerns that the budget deficit will rise under Trump.

Trump said in an interview in February that he would not nominate Powell as Fed chairman again; Powell's second four-year term will expire in 2026.

As the possibility of Trump winning the presidency for a second time increases, U.S. medium- and long-term Treasury yields have also risen.

At present, the U.S. Treasury yield curve is still inverted, and its trend is mainly driven by the psychological changes in expectations about the timing of the first interest rate cut of the current cycle of the Federal Reserve. Despite this, the spread between two-year and 30-year Treasury yields US2US30=TWEB has narrowed to minus 6 basis points from minus 30 basis points before and after the Biden-Trump debate.

"Trump has always been more 'pro-market'." Ferres said, "Looking ahead, the key question is whether fiscal policy will continue to be irresponsibly loose, and what impact this may have on inflation (re-emergence) and future interest rate trends. "In the five presidential elections over the past 20 years, CEO and consumer confidence, especially among small businesses, has been more favorable to Republican wins than Democratic wins," Goldman Sachs analysts wrote. "A Trump win would also boost earnings prospects for some companies, even if there are no substantive changes in policy, as long as improved confidence leads to increased spending and investment." Shortly after the shooting, billionaire hedge fund manager Bill Ackman expressed support for Trump. Musk also voiced his support for Trump on his social media platform X called Trump "tough".

Trump will go to the Republican convention as planned after the attack

Trump said he would go to Milwaukee on Sunday, and Republicans will formally nominate him as the presidential candidate later this week. He previously survived an assassination attempt, further exacerbating the already serious political divisions in the United States.

U.S. President and Democrat Biden said he had ordered an investigation into how a 20-year-old man carrying an AR-15 rifle shot Trump from the roof on Saturday. As a former president, Trump is protected by the U.S. Secret Service for life.

Trump, 78, was holding a campaign rally in Butler, Pennsylvania, which is expected to be one of the most competitive states in the November 5 election. Suddenly, gunshots rang out, his right ear was injured, and blood splattered on his face. Trump's campaign team said he is currently in good condition and does not seem to have suffered major injuries except for the wound on the upper part of his right ear.

Trump will receive the party's formal nomination at the Republican National Convention in Milwaukee, Wisconsin on Monday. Republican National Committee Chairman Michael Whatley told Fox News on Sunday that authorities were working together to secure the venue, and officials had spent months preparing for the venue's security.

"I had originally intended to postpone my trip to Wisconsin and the Republican National Convention by two days, but I have just decided that I cannot allow a 'gunman' or potential assassin to force me to change my schedule or anything else. Therefore, I will be traveling to Milwaukee as planned," Trump wrote on his Truth Social website on Sunday.

The FBI has identified Thomas Matthew Crooks, 20, of Bethel Park, Pennsylvania, as the suspect in the assassination attempt. State voter records show he is a registered Republican who donated $15 to a Democratic political action committee when he was 17.

FBI officials said on Sunday that the gunman acted alone and had not found any ideology or any signs of mental health problems associated with the suspect, nor any threatening language on the suspect's social media accounts.