GTC Capital: Gold Market Gaming in a Wait-and-See Environment

Deep News
Aug 21

On August 21st, gold prices continued to hover below the initial resistance level of $3,350 per ounce, with signals from the Federal Reserve's July policy meeting minutes becoming the market's focal point. The minutes revealed that policymakers still believe more time is needed to assess the health of the U.S. labor market and inflation trends, showing no urgency to take further policy action. GTC Capital believes that gold's oscillating pattern reflects market uncertainty about the Fed's subsequent moves, and these recurring policy expectations are becoming the primary driving factor for gold volatility.

The minutes showed that although two committee members voted in favor of rate cuts during the July meeting, the overall stance remained neutral. Most members still view upside inflation risks as a more prominent threat than employment slowdown, reflecting the Fed's cautious balancing act between its dual mandate of inflation and employment. Some committee members believe inflationary pressures persist and require policy patience, while others are more concerned that labor market cooling could trigger deeper economic weakness. GTC Capital indicates that this divergence means the Fed is unlikely to provide a clear easing path in the short term, with monetary policy more likely to exhibit gradual and data-dependent characteristics.

In terms of market pricing, the CME FedWatch tool shows September rate cut probability has been pushed up to 82%, with investors almost treating rate cuts as a foregone conclusion. However, the Fed's hesitant attitude may limit the scope for further substantial easing throughout the year. Some participants mentioned in the minutes that the persistence of tariff impacts on inflation still depends on monetary policy orientation, and the current federal funds rate may already be approaching neutral levels. This view suggests that while the Fed may implement a symbolic rate cut in September, future cutting magnitude and pace may fall short of market's aggressive expectations. GTC Capital believes that if financial conditions continue to support economic activity, the Fed will be more inclined to adopt a "gradual approach" rather than initiating a rapid rate-cutting cycle.

For gold, this policy environment means continued oscillation in the short term. On one hand, easing expectations continue to provide medium to long-term support for gold prices; on the other hand, the Fed's wavering attitude will suppress gold's sustained breakthroughs. Gold is closely tied to interest rate levels, dollar trends, and bond yields - when markets perceive rising rate cut probabilities, gold typically attracts capital inflows; but once inflationary pressures intensify or the dollar strengthens, gold prices easily come under pressure. GTC Capital believes this complex environment makes gold's investment value more reflected in its role as a hedging asset and portfolio balancing tool, rather than a singular trending investment opportunity.

Looking ahead, market focus will concentrate on Jerome Powell's upcoming speech at the Jackson Hole central bank symposium. Investors widely expect him to reiterate the Fed's dual mandate and emphasize that policy paths depend on data performance. GTC Capital believes that if Powell continues his cautious tone and avoids releasing clear easing signals, gold may maintain range-bound oscillation in the short term; however, if inflation or employment data shows significant deviation, market repricing of the Fed's policy path could bring new volatility windows. Against this backdrop, investors need to closely monitor marginal changes in economic data and shifts in the Fed's internal risk-balancing attitudes.

Overall, GTC Capital believes the gold market is in a delicate phase: supported by easing expectations while constrained by policy hesitation and dollar strength. For investors, gold remains an important hedging asset in medium to long-term allocations, especially given uncertain global economic growth prospects, making it more valuable for portfolio diversification. For short-term operations, investors should maintain flexibility, combining interest rates, dollar index performance, and macroeconomic data to moderately adjust positions and avoid risks from one-sided bets.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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