Where we are: Gold is trading down sharply this morning, breaking below the $4,100 mark and testing levels not seen in seven months. The COMEX contract is currently off 2.89% day-on-day at $4,029.4. This move represents a significant break from the overnight range, which saw some minor volatility but no clear direction. We are well below yesterday’s New York close, with the current price action suggesting further downside pressure into the New York open.
What’s driving it: The primary driver for gold remains the relentless climb in US real yields. The 10-year TIPS yield has pushed up to 2.28%, a 7 basis point increase day-on-day, directly pressuring the non-yielding precious metal. This is compounded by a slight easing in inflation expectations, with 10-year breakevens ticking down 2 basis points to 2.21%. While the US dollar is firming (DXY at 101.73), this is a secondary effect of the real yield move, not the primary catalyst for gold’s weakness. The tech-led selloff in equities is also forcing some liquidation across portfolios, with gold caught in the crossfire.
- US 10Y Real Yield (TIPS) at 2.28% (+7.0bp d/d) is the dominant headwind.
- 10Y Breakeven Inflation at 2.21% (-2.0bp d/d) is reducing the inflation hedge appeal.
- Net non-commercial positioning remains modestly long at +180,220 contracts, suggesting a potential for further capitulation if the downside continues.
NY session focus: The New York session opens with a clear bearish bias for gold, driven by the domestic real yield narrative. There are no high-impact US data prints scheduled for release before the NY cash open that would directly alter this picture. Key levels to watch on the downside are the $4,000 psychological level, followed by the 7-month lows seen in late March around $3,950. The trade that is working is short gold. The trade at risk is any unexpected dovish shift from the Fed or a sudden de-escalation in geopolitical tensions that would send real yields lower. The pain trade for this asset is a sustained move lower, forcing leveraged longs to unwind aggressively.