Where we are: Gold is trading near $3,250, down from Friday’s highs and on track for a weekly decline. This move reflects a broader shift in sentiment as US real yields tick higher, creating a direct headwind for the precious metal. We’re seeing some consolidation as we approach the New York open, with traders assessing the impact of recent moves in US Treasuries.
What’s driving it: The primary driver for gold remains the trajectory of US real yields, which have seen a notable uptick. US 10Y TIPS are now trading at 2.23%, a 9bp increase on the week, directly pressuring bullion. This move is occurring despite a slight softening in 10Y breakeven inflation expectations, suggesting a hawkish tilt from the Federal Reserve is the dominant narrative. The broader macro picture is mixed, with the USD Index showing some weakness, but this is insufficient to offset the negative real yield impulse.
- US 10Y Real Yields are up 9bp to 2.23%, a significant headwind for gold.
- Speculative positioning shows net non-commercials at +173,837 contracts, a modestly long stance but off recent extremes.
- The VIX has spiked 12.37% to 18.44, indicating a rise in market volatility that could eventually support gold, but the real-yield move is currently dominating.
NY session focus: The key focus for the New York session will be the 08:30 ET US data releases, particularly any figures that could influence the Federal Reserve’s rate path. Given the current upward pressure on real yields, any data suggesting sticky inflation or a resilient economy could exacerbate the downside for gold. Conversely, softer-than-expected prints might offer some relief. The trade that’s working is short gold against rising real yields. The trade at risk is any significant reversal in US yields or a sudden escalation of geopolitical tensions that forces a safe-haven bid. The pain trade for this asset is a sustained move higher in real yields, pushing gold towards the $3,200 handle.