U.S. Treasury Secretary rarely calls for a 150 basis point rate cut, gold rises in response, and the dollar index is under pressure

According to Zhitong Finance APP, after U.S. Treasury Secretary Janet Yellen urged the Federal Reserve to lower borrowing costs, traders increased their bets on a rate cut by the Fed, causing gold prices to rise. As of the time of publication, gold futures prices rose by 0.16%, reported at $3,413.62 per ounce; the U.S. dollar index fell by 0.11%, reported at 97.73.

Yellen made the clearest call yet for the Fed to begin a rate-cutting cycle. She believes that the federal funds rate should be at least 1.5 percentage points lower than its current level. On Wednesday, Yellen stated, "I think we may see a series of rate cuts starting with a 50 basis point cut in September. Regardless of which model you refer to, it suggests that our rates should be lowered by 150 to 175 basis points."

The Fed maintained its benchmark interest rate in the target range of 4.25% to 4.5% at its most recent policy meeting. Yellen reiterated that she believes if officials had known about the revised labor market data released two days after that meeting, they might have already cut rates. She referred to the data released by the U.S. Bureau of Labor Statistics on August 1, which revised down the non-farm payrolls for May and June by 258,000 jobs. She mentioned that the June meeting might have been similar. Yellen said, "I suspect we could have cut rates in June and July."

It is noteworthy that U.S. Treasury Secretaries typically do not express specific views on the Fed's interest rates, and Yellen herself has stated in recent months that she would only discuss past policy decisions of the Fed and not future decisions.

Yellen's remarks intensified speculation about the Fed's actions in September. Some investors are betting that the Fed will significantly cut rates next month. Gold typically benefits in a low-interest-rate environment because it does not generate interest itself. Meanwhile, according to a government official, the Trump administration is considering several private sector individuals for the position of Fed Chair, including a strategist from Jefferies and an executive from BlackRock.

Ole Hansen, head of commodity strategy at Saxo Bank, stated, "With the rising risk of stagflation and someone advocating for rate cuts eventually taking over as Fed Chair, gold's trajectory will be higher." Data shows that gold prices have risen about 28% this year, with most of the increase concentrated in the first four months. The rise in gold prices has benefited from increased safe-haven demand due to escalating geopolitical and trade tensions, as well as massive purchases by central banks.

Additionally, traders are still waiting for clarification on whether tariffs will be imposed on gold bar imports. The U.S. Customs and Border Protection announced last week that tariffs would be imposed on imported gold bars, shocking the market and driving the premium of New York gold futures prices relative to London spot prices to soar. On Monday, Trump stated that he would not impose tariffs but did not provide further details