The announcement by the US Treasury Secretary to expand Treasury buybacks stirred notable market movements last week. This intervention in the bond market initially drove Treasury yields lower, pushing the US dollar to a three-month trough. Gold and Bitcoin emerged as the primary beneficiaries, with the former climbing 5% on the week to break above the $4,600 mark, while the latter surged an impressive 23% to surpass $77,000.

Non-US currencies broadly strengthened against the dollar. Although the three major US indices closed higher on Friday, they recorded losses for the week. Hong Kong stocks continued to lead global markets in performance. Looking ahead, in addition to ongoing Treasury market dynamics, three major financial events will dominate the spotlight this week: the Jackson Hole Economic Symposium, the US July PCE inflation report, and Nvidia's earnings release.

Jackson Hole Global Central Bank Symposium – August 27-29

This annual gathering of central bank leaders, held in late August in Jackson Hole, Wyoming, has a history spanning over four decades. It has traditionally served as a platform where Federal Reserve chairs and other central bank governors signal major policy shifts, underscoring its significant influence on global markets. Since new Fed Chair Warsh took office without providing specific rate guidance, investors are keenly watching whether he will offer any crucial signals regarding short-term rate direction or the longer-term policy framework during this week's meetings.

However, after the Treasury Secretary's intervention on elevated yields proved only marginally effective last week, Warsh may see little reason to directly confront market pressures. He could well maintain a cautious and reserved communication style. Consequently, Treasury yields might resume their upward trajectory. Interest rate futures currently indicate a roughly 40% probability of a rate hike in September, while the likelihood of a hike before year-end stands at approximately 70%.

US July PCE Price Index – Wednesday 8:30 PM (Beijing Time)

This measure, the Fed's preferred inflation gauge, is expected to show a decline from 3.7% to 3.6%, with the core PCE reading anticipated to hold steady at 3.3%. The corresponding CPI and PPI figures released two weeks ago were relatively moderate. Since this data release conveniently precedes the Jackson Hole symposium, a surprising deviation could intensify discussions regarding inflation and the future path of interest rates at the conference.

Nvidia Earnings – US Markets Wednesday After Close

Market consensus anticipates Nvidia's second-quarter revenue to reach approximately $92 billion, with gross margins holding around 75%. While beating expectations is standard practice for Nvidia—having surpassed revenue estimates for 18 consecutive quarters—investors will focus more on its forward guidance, which will shed light on the health of AI spending and the sustainability of demand. Despite Nvidia's relatively low capital expenditure requirements and substantial cash reserves, which help it navigate volatile cycles, its recent deeper involvement in AI financing projects exposes it to potential risks associated with massive, potentially multi-trillion-dollar circular financing arrangements, raising concerns among some investors.

Other significant earnings this week include Pinduoduo on Monday, and CrowdStrike and Salesforce on Wednesday.

Bessent and Geopolitical Factors

The Treasury Secretary has been particularly active recently, having coordinated intervention in the yen market with Japan in late July, announcing expanded Treasury buybacks in August to influence the bond market, and commenting on Iran. Bessent indicated last week that "the most severe sanctions in history" would be imposed on Iran. He is scheduled to hold a press conference on Monday afternoon US time to reveal the details of these sanctions. Similar to his previous interventions, the impact of sanctions on Iran may be quite limited, as the country has been under prolonged sanctions for years. Should the new measures provoke some form of retaliation from Iran, geopolitical tensions could flare up again. However, for now, the confrontation appears to have shifted from military to economic avenues, and oil prices seem to have lost their upward momentum in the short term.

Gold's Technical Outlook and Momentum

As depicted in the charts, gold decisively broke above its 200-day moving average and the $4,600 level last week. Current turbulence in the Treasury market—regardless of yield direction—along with concerns over the AI trade, seems to highlight gold's safe-haven appeal, solidifying and even reinforcing the rebound momentum seen since early August. With overbought signals emerging on both daily and hourly charts, a slowdown or minor pullback in the short term is possible. However, this is unlikely to dampen bullish enthusiasm. While the price remains above the $4,600 support (the lower boundary of the consolidation pattern), a strategy of buying on dips appears favorable, with $4,700 identified as the next upside target for bulls. On the downside, a break below the consolidation pattern could lead to a test of the $4,500/4,520 area. The chart below shows that speculative long positioning in gold reached its highest level since late January during the week ending August 18, highlighting the prevailing market optimism.