On Tuesday (July 19), the international gold price continued to remain stable, supported by the continued decline of the US dollar. As the market's concerns about the Fed's more active tightening policy have eased, the US dollar exchange rate is continuing to decline in a corrective manner. But the Fed cannot avoid the thorny inflation problem, and the dollar will continue to sit firmly on the currency throne.

At 15:11 Beijing time, spot gold fell 0.05% to US$1,708.36 per ounce; the main COMEX gold futures contract fell 0.25% to US$1,705.9 per ounce; the US dollar index fell 0.34% to 107.087.

After surging to a high of 80% last week, expectations for a 100-basis-point rate hike by the U.S. central bank at next week's policy meeting were held at around 30%, according to the CME's "FedWatch" tool, two sessions ahead of the U.S. benchmark. Both fell more than 0.5%, which slowed gold's decline.

The U.S. dollar is continuing its corrective decline as fears of more aggressive Fed tightening have eased. The Fed's less aggressive rate hike path could help the U.S. economy avoid a recession. Gold prices will continue to be affected by broader sentiment during the Fed silence.

But the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said on Monday that its holdings fell 0.5% to 1,009.06 tonnes, the lowest since late January. Although gold is seen as an inflation hedge, higher interest rates raise the opportunity cost of holding gold as a non-yielding asset.

Strategists at TD Securities expect gold prices to continue to fall, "gold prices have crossed the trend reversal threshold, which marks the gold market's confirmation that it has temporarily entered a bear market trading mechanism. Although expectations for a 100 basis point rate hike by the Federal Reserve this month have declined, increasing the short-term Short-squeezing risk, but it would also create ideal conditions for further downside... The Fed can't dodge the thorny inflation issue, and the dollar will remain firmly on the currency throne."

Market participants now expect the Fed to raise rates by 75 basis points at its July 26-27 meeting. The European Central Bank and the Bank of Japan will meet on Thursday (July 21). The ECB is widely expected to raise rates by 25 basis points. But the BOJ will continue its dovish tone and will discuss how to inject liquidity into the economy to stimulate aggregate demand.

High inflation is putting pressure on corporate earnings and affecting household incomes. However, with lower oil prices and reduced demand for household durable goods in June, the demand price mechanism imbalance will ease and price pressures will soon peak. Upbeat retail sales and other demand indicators were driven more by price pressures than aggregate household demand. Therefore, the reduction in the quantity scale on the demand side will depress the inflation rate.