Where we are: Gold is currently trading just below $4,710, struggling to find direction after oscillating overnight. The price action remains choppy, caught between support around $4,700 and resistance near $4,725. This level is below Friday’s NY close.
What’s driving it: Falling real yields continue to provide underlying support for gold, with the US 10Y real yield down 3bp to 1.93% as of Friday’s close. That tailwind is somewhat countered by ongoing concerns about inflation, as reflected in the 2bp rise in 10Y breakeven inflation to 2.47%. The market is now bracing for today’s 08:30 ET CPI print, which could significantly impact the Fed’s policy outlook and, consequently, real rates. Speeches today from Fed governors Cook, Waller and Vice Chair Bowman on tokenization and Fed operations are unlikely to move the needle, as they are backward-looking to events last week.
- US 10Y Real Yield: 1.93% (-3.0bp d/d), supporting gold
- Indian banks are resuming bullion imports after a month-long halt, per Reuters. This should increase physical demand.
- Net non-commercial gold positioning remains modestly long, at the 21st percentile, suggesting no immediate squeeze risk.
NY session focus: All eyes are on the 08:30 ET US CPI release, with forecasts calling for a rise to 3.7% y/y. A hotter-than-expected print would likely trigger a spike in nominal yields and a subsequent drop in gold, while a softer reading could see gold push higher, testing resistance around $4,730. Keep an eye on the Fed Chair nomination vote later today; a surprise failure to pass could trigger risk-off flows and benefit gold. The trade that’s working is buying dips on real-yield weakness. The trade at risk is shorting gold ahead of the CPI data. The pain trade is a dovish surprise from CPI leading to aggressive short covering, sending gold to $4,750.