The market estimates that there is a 77.9% chance the Federal Reserve will cut interest rates in September.

On July 5th, Eastern Time, COMEX gold futures for August closed up 1.3%, rising above $2,400 per ounce for the first time since June 7th.

The gradual cooling of the U.S. labor market is boosting expectations for a Federal Reserve rate cut, and gold is regaining upward momentum as a result.

As of the close on July 5th, Eastern Time, COMEX gold futures for August closed up 1.3%, rising above $2,400 per ounce for the first time since June 7th.

Not only that, but the spot gold price also rose to $2,391.92 per ounce, a six-week high.

Spot gold prices accumulated a 2.87% increase this week, the largest weekly increase in nearly 13 weeks.

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Gold stocks and gold ETFs are also targets for gold investment.

On July 5th, Beijing Time, China Gold, Silver Tai Gold, and Shandong Gold closed up 8.85%, 6.72%, and 4.85% respectively.

In terms of ETFs, the Gold Stock ETF by Guotai Fund, the Gold Industry ETF by Ping An Fund, the Gold Stock ETF by Huaxia Fund, and the Gold Stock ETF by Huaan Fund all rose by 4%.

On July 5th, Eastern Time, data from the U.S. Department of Labor showed that in June, the U.S. unemployment rate was 4.1%, the highest since November 2021.

At the same time, wage growth continues to cool.

These factors further consolidate the market's expectations for a Federal Reserve rate cut in September.

Li Gangfeng, an analyst at the European mining fund Commodity Discovery, believes that the market's optimistic sentiment about the Federal Reserve's rate cut is driving gold prices higher.

Due to the recent deterioration of U.S. economic data, based on futures market data, the market estimates that there is a 77.9% chance the Federal Reserve will cut interest rates in September.

Hu Yifan, Head of Investment and Macroeconomics for UBS Wealth Management in Asia Pacific, believes that among commodities, gold has been one of the best-performing investment targets in recent years.

This is not only because of expectations for a Federal Reserve rate cut but also because it is a tool for hedging geopolitical risks and volatility.

Before the end of the year, gold still has room to rise, possibly reaching $2,600 per ounce, and by mid-2025, it could reach $2,700 per ounce.

Looking back at the first half of the year, the starting point for international gold prices was $2,063 per ounce, twice reaching above $2,400 per ounce, and finally closed at $2,326 per ounce, with an increase of about 13.5%.

This is behind the market's bets that major central banks around the world will start to cut interest rates, coupled with geopolitical disturbances.

However, entering June, the market's expectations for the Federal Reserve are mixed, and gold prices are therefore caught in a range of fluctuations.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that the latest employment data is key to reigniting expectations for a Federal Reserve rate cut.

"The downward revision of non-farm employment data and the rise in unemployment rates again help to consolidate expectations for a Federal Reserve rate cut in September."

Tai Wong, an independent metal trader based in New York, also said, "If the Federal Reserve starts to cut interest rates, international gold prices are expected to return to the historical high of $2,450 per ounce."

The latest data shows that in June, the United States added 206,000 non-farm jobs.

However, in May, the number of new non-farm jobs in the United States was revised down from 272,000 to 218,000.

In June, the U.S. unemployment rate rose to 4.1%, slightly higher than the expected 4.0%, the highest since November 2021.

Prior to this, many data have already revealed clues, such as a sharp decline in job vacancies and an increase in the number of first-time applicants for unemployment benefits.

The Federal Reserve Watch tool on the Chicago Mercantile Exchange shows that as of July 6th, the market expects the Federal Reserve to most likely cut interest rates in September, with the probability of a rate cut exceeding 70%; and expects two rate cuts within the year.

Hu Yifan also believes that the Federal Reserve is expected to cut interest rates by 25 basis points for the first time in September and again in December.

In addition to the cooling factor of the employment market, he also said that the decline in inflation is also a key factor supporting the Federal Reserve to start cutting interest rates.

Inflation and employment are the two major monetary policy goals of the Federal Reserve.

"Globally, the overall and core inflation of many countries has fallen from the high point.

In June 2022, the U.S. inflation rate rose to a high of 9.1%, and has now fallen to 3.3%, and is expected to reach 2.9% by the end of the year.

The PCE deflator that the Federal Reserve cares most about has also fallen to 2.7%, and may reach 2.4% by the end of the year.

The inflation level in Europe has also fallen from a high point."

Hu Yifan said.

In addition, the slowdown in wage growth in the U.S. labor market also adds evidence to the cooling of inflation.

Data from the U.S. Department of Labor shows that in June, the average hourly wage in the United States rose by 3.9% year-on-year and 0.3% month-on-month, both lower than the previous month.

Looking forward to the future, Hu Yifan said that after a continuous rise, international gold prices still have room to rise, and are expected to reach $2,600 per ounce and $2,700 per ounce by the end of 2024 and mid-2025, respectively.

"Investors should have a gold allocation in their asset allocation, which will bring better returns to investors."

He said.

In addition to interest rate cut expectations, retail consumption is also a major demand for the gold market.

Recently at a precious metals conference held in Singapore, participants were enthusiastic about the prospects for gold consumption, believing that demand in Asia will remain strong.

Ruth Crowell, CEO of the London Bullion Market Association, even said that the Chinese market is still a major driving force for gold prices.

In addition, the fiscal issues of the U.S. government and geopolitical uncertainties are also a major driving force for gold buying.

Against this background, investors buy gold to hedge against sovereign debt and geopolitical risks.

Johanna Kyrklund, an investment officer at Schroders Investment Management who recently participated in roadshows in Asia, is a representative of this view.

"The risks we see, including fiscal risks, geopolitical risks, and inflation risks, can sometimes be better addressed through gold, and I prefer gold to U.S. Treasury bonds."

He said.

Just a decade ago, the total debt of the U.S. government was only about 70% of the country's Gross Domestic Product (GDP).

The Congressional Budget Office estimates that by 2024, the total debt of the U.S. government will be roughly equal to the country's GDP.

By 2028, this ratio may reach a record high of 106%, comparable to the record level set during World War II to raise funds for the war.

In the upcoming U.S. presidential election, tax policy is one of the main differences between the two parties.

The Republican presidential candidate Trump advocates for continuing to promote large-scale tax cuts, while the Democratic presidential candidate Biden tends to focus more on fiscal stimulus.

Currently, the market bets on the possibility of Trump's election victory, which means that policies including tax cuts may push up the U.S. fiscal deficit and inflation.

Central banks are representatives of gold hedging purchases.

According to a report released by the World Gold Council in mid-June, more and more central banks plan to increase their gold reserves within a year, the highest level since the organization began its survey in 2018.

The main reasons for increasing positions are "long-term value preservation or hedging inflation," "performance during crises," and "effective portfolio diversification."

However, in terms of geopolitics, instability in Europe is weakening.

Institutions such as Citigroup recommend buying British government bonds, saying that compared with other markets, British government bonds are relatively safe.

This bullish sentiment reflects the market's calm view of the results of the British general election, with the Labour Party winning the election on July 5th, ending 14 years of Conservative rule.

In the upcoming second round of the French parliamentary elections, centrist and left-wing alliance candidates have withdrawn one after another to fully block the far-right.

The quantitative model of investment bank Jefferies shows that the far-right will not gain an absolute majority in the French parliament.