Gold plunges sharply approaching 2470! Has the market's rate cut expectations gone too far?

On Thursday's US session, spot gold touched down to $2480, the first time since August 16; spot silver briefly fell below $29 per ounce.

Earlier, some economic data released by the United States weighed on gold. The service industry PMI recorded 55.2, higher than the expected 54 and the previous value of 55. The report stated that service activities have risen to a two-month high.

The latest report from the strategy team at Shengbao Bank stated, "The risk of gold consolidation or even pullback is imminent. After the latest rebound set a new record, the gold price trend shows signs of fatigue, especially considering the moderate reaction to weak US job growth yesterday, and the Federal Open Market Committee meeting minutes almost confirmed a rate cut in September."

In addition, Daniel Hynes, Senior Commodity Strategist at ANZ Bank, stated: "Recent weak gold demand in China has suppressed the rise in precious metals."

Recent customs data shows that China's gold imports in July fell by 24% to 44.6 tons, the lowest level in over two years. This decline occurred after a larger decline in June, when shipments plummeted by 57% month-on-month to the lowest level in four years, as the significant drop in China's gold premium at that time deterred importers.

In July, the premium of the Shanghai Gold Exchange relative to the London Gold Exchange has decreased, with the daily average price dropping from $28 per ounce in June to $12 per ounce. The average premium in August has further dropped to $1, with the premium turning into a discount of $9 this week.

Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, stated that market expectations for a dovish Fed may be overdone. The RSI indicator for gold suggests that gold is about to enter the overbought zone, and a pullback at current levels would be healthy.

Currency analysts at Brown Brothers Harriman stated that the US dollar is oversold in the short term. Despite the widespread expectation that Powell will hint at a rate cut in September during the Jackson Hole speech, it is believed that the market has priced in the rate cut too much. Dollar bears may be caught off guard by Powell's dovish comments this Friday. We believe that the current risk balance requires a 25 basis point rate cut, not 50 basis points. Powell should emphasize data-driven accommodative policies rather than committing to any future rate path in advance