The European Natural Resources Fund Commodity Discovery analyst Li Gangfeng wrote last week that Powell said the Fed is not in a hurry to cut interest rates. He believes that if the US economy develops as they predict, the US will cut interest rates twice more this year, totaling 50 basis points (a total of 1% for this year). After the speech, both the stock market and gold showed signs of deflation. In addition to the better-than-expected increase in US jobs announced last Friday, the market has changed the expected rate of the November interest rate cut from 50 basis points to 25 basis points, leading to a decrease in the popularity of gold. Previously, the added job data provided by US official agencies has been proven to be a farce (with nearly a million fewer jobs added in the past year). It appears that the market is still trading based solely on government-provided data, meaning that the direction of investment market trends is completely controlled by government preferences and detached from fundamentals, which is a dangerous situation. He stated that despite the technical improvements in gold, do not overlook Middle Eastern tensions providing support for gold. As of last Tuesday, net long positions in platinum and copper in the US futures metals had continued to rise, while net long positions in other metals had fallen. Net long positions in US gold funds fell by nearly 6% last week, ending a three-week streak of increases; meanwhile, short positions in funds fell sharply by 35%, resulting in fund holdings falling from a net long of 793 tons to 775 tons, marking the 51st consecutive week of net long positions (compared to 46 consecutive weeks before), and reaching 85% of the historical high of 908 tons in September 2019. As of October 1st, the price of gold has risen by 28.9% this year (up from +28.7% the previous week), while net long positions in funds have...125 times horizontal operationData source: LSEG Workspace Generally, the higher the market panic, the higher the gold-silver ratio will be. For example, in 2020, the global spread of the new crown virus caused the gold-silver ratio to rise to a historical high of over 120 times. Last Friday, the gold-silver ratio index was 82.37, a decrease of 1.8% compared to the previous week, and a cumulative decrease of 5.0% this year. It has risen by 14.0% since 2023, with the highest and lowest points in 2023 being 91.08 and 75.93. It fell by 3.1% in 2022. It should be noted that both the U.S. dollar gold price/North American gold mining stock ratio and the gold-silver ratio are showing a clear trend of bottoming out and rebounding. The financial markets have clearly entered into recessionary trading. The market is expecting a major reversal in the likelihood of a rate cut in the United States in November. At the time of writing, the market believed that the probability of a rate cut by the Federal Reserve on November 7, including a further cut of 50 basis points, had dropped from 53.3% two weeks ago to 0% last Friday. The current market believes that the probability of a 25 basis point rate cut in November is as high as 97.4%: Source of image: CME Group This is a chart showing the probability distribution of interest rates in the United States in December 2024, as predicted by the futures market: Source of image: CME Group As of last Friday, the mainstream view in the market was that the United States would cut rates by a further 50 basis points for the remainder of the year. A week ago, the market believed that there was a 49.7% chance that the United States would cut rates to 4.00%-4.25% by the end of the year, but this probability plummeted to 17.7% by last Friday; on the other hand, the probability of a rate cut to 4.25-4.50% surged from 21.3% a week ago to 80.2% last Friday, with the market believing that the pace of rate cuts in the United States had become more cautious. In just one week, the market's expectations for interest rates in the United States underwent such a significant adjustment, once again confirming what the author had said: after a long period of verification, futures market predictions of U.S. interest rate trends, especially longer-term expectations, are generally incorrect. For example, the market had originally expected the Federal Reserve to cut rates by only 25 basis points in September, but in the week before the policy meeting, the market suddenly bet that the Federal Reserve would cut rates by 50 basis points in one go, likely due to some people in the market receiving inside information. The author originally believed that when the Federal Reserve cut rates by 25 basis points in September, it marked the peak of the stock market; therefore, the 50 basis point cut was somewhat unexpected (it should be noted that the economic data released by the United States before the policy meeting in September was not that bad). The result of the 50 basis point cut was to (temporarily) shift the trading sentiment from recessionary to optimistic. Last week, Powell stated that the Federal Reserve was not in a hurry to cut rates, and he believed that if the U.S. economy developed as they predicted, the United States would cut rates by a further 50 basis points this year (a total of 1%). Following his speech, both the stock market and gold showed signs of leakage of air. In addition, the announcement last Friday that the number of new jobs added in the United States in September was better than expected caused the market's expectation of a 50 basis point rate cut in November to change to a 25 basis point cut, reducing the popularity of gold. The previously provided data on new job positions by U.S. official institutions has been proven absurd (the number of new job positions decreased by nearly 1 million over the past year). It seems that the market is still trading purely based on the data provided by the government, indicating that market trends are completely controlled by the government's preferences and detached from fundamentals, which is a dangerous situation. The current market situation is clearly such that if the U.S. stock market does not experience a major decline (if a major decline occurs, safe assets will benefit), then risk assets (including the most popular companies in the U.S. stock market, digital currencies, silver, copper, and other commodities) and safe assets (including bonds and gold) will rise to varying degrees. However, it should be noted that the next policy meeting of the Federal Reserve will be in November, which means that the focus of the U.S. stock market in October may likely shift to the U.S. presidential election. And because at the moment, the two candidates seem evenly matched, it is estimated that due to uncertain factors, the U.S. stock market may become more volatile in October. On the other hand, according to the World Gold Council, before the National Day holiday in China, both China and India were offering discounts on local gold prices compared to international prices, reflecting an overbought sentiment in the physical gold market: Source of image: World Gold Council Whether Chinese gold prices can shift from a discount to a premium after the National Day holiday may be a short-term key for gold prices. The biggest challenge in the next 12 to 24 months will be where the Federal Reserve goes when the United States starts cutting rates and inflation pressures regain momentum. Despite the trend of deteriorating gold technicals, the author believes that the situation in the Middle East is providing support for gold prices. Although the local currency has recently strengthened, the author believes that it is just a temporary reversal after the overcrowding trade driven by the strong dollar. Especially since last week, despite a general rebound in environmental protection stocks, the author tends to believe that this rebound is just speculative and luring more funds into the market. Therefore, the author suggests gradually reducing holdings of risk assets during this rebound (although it is uncertain how long it will last) to secure profits.