Where we are: Gold (COMEX) is currently trading at 4531.9, down 0.49% on the day and near the bottom of its intraday range of 4519.3-4576.8. This price action represents a continuation of the downward pressure seen in late trading last week. The metal remains below the psychological 4550 level and well off Friday’s highs.
What’s driving it: Gold is under pressure as renewed Middle East tensions stoke inflation fears, prompting some profit-taking after recent gains. The move is being amplified by the stronger dollar; the DXY index is currently at 99.06, up 0.13% on the session, weighing on bullion prices as investors reduce holdings. With no specific drivers domestically, gold is tracking the general risk-off sentiment reflected in the mild sell-off of US treasuries.
- The DXY is at session highs, fuelled by the risk-off tone dominating early trade.
- Net non-commercial positions remain modestly long at 154,260 contracts, leaving room for further downside if the dollar strengthens.
- Goldman Sachs noted that hedge funds are buying stocks at the fastest pace in 6 months which suggests a change in capital allocation, which may be causing a headwind for gold prices.
NY session focus: All eyes are on the 10:00 ET release of the ISM Manufacturing PMI and ISM Manufacturing Prices data. A higher-than-expected print on prices could further bolster the dollar and pressure gold lower. Later in the day, at 20:30 ET, FOMC Member Powell speaks; traders will be listening closely for any further hints on the path of interest rates. Key levels to watch on the downside are 4515 and then 4500. The pain trade is a surprise dovish shift from Powell or a weaker-than-expected ISM print, which could trigger a sharp rally towards 4575.