Where we are: Gold (COMEX) is currently trading at 4557.5, down 52.9 or -1.15% on the day. The intraday range has been 4557.4 to 4624.1, with the price currently near the low of the day. This marks a substantial move lower from yesterday’s close, driven primarily by rising real yields.
What’s driving it: The primary headwind for gold is the continued ascent in US real yields, with the 10Y TIPS yield rising to 1.91% as of Monday, a further 2.0bp increase. This diminishes gold’s appeal as a safe-haven asset. While breakeven inflation remains stable at 2.44%, the widening gap between nominal yields and inflation expectations pressures bullion. Today’s losses are also compounded by the stronger dollar, as the DXY edges higher to 98.61. The backdrop ahead of the 14:00 ET FOMC decision is one of rising inflation fears fuelled by oil price volatility, evident in the recent Reuters wire noting that “Gold slips as oil prices fuel inflation fears ahead of Fed rate decision”.
- The US 10Y yield is at 4.371%, a rise of +1.6bp, further diminishing gold’s attractiveness as an alternative investment.
- The COMEX gold contract has broken key support near 4600, potentially triggering further technical selling.
- Speculative positioning in gold remains modestly long, with net non-commercial positions at +164,006 contracts, placing it in the 25th percentile. This leaves gold vulnerable to a potential long liquidation if bearish sentiment persists.
NY session focus: All eyes are on the FOMC today, with the rate decision and statement due at 14:00 ET followed by the press conference at 14:30 ET. Any hawkish signals or indications that the Fed intends to maintain higher rates for longer will likely exert further downward pressure on gold. Key levels to watch are 4550 as initial support, followed by 4500. The trade that is working is shorting gold on rallies, while the trade at risk is holding long positions. The pain trade would be a dovish surprise from the Fed that sends real yields tumbling and ignites a short squeeze in gold.