Where we are: Gold (COMEX) is currently trading at 4591.0, down 107.7 or 2.29% on the day, testing three-week lows. The intraday range has been 4567.8 to 4716.4. This move lower extends the recent weakness and puts it well below Friday’s close, suggesting further downside pressure.
What’s driving it: The primary driver for this pullback in gold is the stabilization of US real yields, which had been providing a tailwind for bullion. While 10Y real yields (as of Friday) are still down 3bp, the recent rise in nominal yields is outpacing breakeven inflation expectations, reducing the appeal of gold as an inflation hedge. The stronger dollar, with the DXY at 98.58 (+0.30%), is adding further pressure, as is some risk-on sentiment seeping into equities with Dow futures showing resilience. The lack of immediate clarity on future Fed policy is leaving gold vulnerable to these cross-currents.
- US 10Y yields have climbed to 4.364%, a rise of 1.6bp today, negating some of the real yield support for gold.
- The DXY breaking above 98.50 signals renewed dollar strength, a headwind for gold priced in USD.
- Despite the decline, net non-commercial positioning in gold remains modestly long (+164,006 contracts), leaving the market vulnerable to a potential flush if the current bearish trend accelerates.
NY session focus: All eyes will be on the 10:00 ET release of US CB Consumer Confidence data. A weaker-than-expected print could reignite concerns about economic growth and prompt a flight to safety, providing some support for gold. Key levels to watch are the intraday low of 4567.8 and then 4550 as the next level of support, while a break above 4650 would signal a potential reversal. The short-term trade is clearly short gold, but the pain trade would be a surprise dovish tilt from the Fed narrative leading to a renewed fall in real yields.