October 15th, spot gold continued its upward momentum, breaking above the $4200 per ounce threshold for the first time in history, gaining over 1.4% intraday.

Analysis from Guotai Junan Futures:

At 00:20 early this morning, Federal Reserve Chairman Powell delivered remarks at the National Association for Business Economics (NABE) annual meeting, releasing multiple policy signals that triggered significant volatility across global financial markets. According to the CME "FedWatch" tool, the probability of the Fed maintaining rates unchanged in October stands at 2.7%, while the probability of a 25 basis point cut is 97.3%. For December, the probability of maintaining rates unchanged is 0.1%, with a 6.4% probability of a cumulative 25 basis point cut and a 93.5% probability of a cumulative 50 basis point cut.

Powell's speech highlighted several key areas of focus:

First, regarding employment data, the overall situation appears genuinely concerning. Previously released non-farm payroll data showed weakness, falling short of market expectations, with the unemployment rate climbing to an annual high of 4.3%. This aligns with private sector data from Automatic Data Processing Inc (ADP), creating mutual confirmation - ADP data has consistently weakened over the past three months: August's job additions fell below market expectations, and September not only missed targets but showed rare negative growth with actual job losses. These weak indicators all point to the same signal: pressure on the U.S. labor market is clearly intensifying. Powell explicitly acknowledged this in his speech, emphasizing that employment risks are rising.

Another significant development was his stance on halting balance sheet reduction. Powell clearly signaled that "balance sheet reduction may cease in the coming months," marking a potential end to three years of monetary tightening policy. Simply put, the Fed has spent the past three years "draining liquidity" (stopping purchases or selling Treasury bonds) to withdraw dollars from the market, aiming to tighten liquidity and suppress inflation. Although the pace of balance sheet reduction was slowed twice in March and June this year, passive reduction continued. However, this statement represents the first clear indication in nearly three years of "turning off the drainage tap." This move could prevent further liquidity tightening while creating a more accommodative monetary environment for future rate cuts, signaling that the Fed's policy focus may shift from "solely fighting inflation" to a new phase of "balancing growth and employment."

However, it's important to note that Powell reiterated concerns about inflation, particularly mentioning that tariffs are pushing up price pressures. He specifically pointed out that price increases primarily reflect the impact of tariffs rather than general inflationary pressure. Therefore, future trade conflicts between nations, especially with the U.S., require particular attention. If friction persists and the U.S. continues wielding the tariff weapon, it could potentially drag on the pace of rate cuts.