Where we are: Gold (COMEX) is currently trading at 4646.7, up 92.0 points or 2.02% on the day, having traded in a range of 4550.9 to 4658.3. This rally marks a significant rebound from one-month lows and positions the metal well above yesterday’s close. The move is occurring despite a backdrop of rising real yields earlier in the week, suggesting other forces are at play.
What’s driving it: Gold’s surge appears primarily driven by a weakening dollar, as evidenced by the DXY falling 0.39% to 98.33. The Federal Reserve’s recent FOMC statement likely contributed to the dollar’s decline, as the market interprets the Fed’s signaling of inflation risks as a potential pause in the rate-hike trajectory. This narrative is overriding the headwind from the earlier rise in US 10Y real yields, which stood at 1.92% as of Tuesday. Breakeven inflation is also slightly higher, adding a tailwind.
- The DXY’s 0.39% drop is providing significant lift to gold, overpowering earlier headwinds.
- The Fed’s recent FOMC statement on inflation risks is likely capping dollar strength, creating a more favorable environment for gold.
- Speculator positioning in gold is modestly long, with net non-commercial contracts at +164,006, which is in the 25th percentile. This could limit further upside without fresh buying, though squeeze risk is not pronounced.
NY session focus: All eyes are on the 08:30 ET data releases, particularly the Advance GDP q/q and Core PCE Price Index m/m figures. Stronger-than-expected GDP (forecast 2.2%) could trigger a hawkish repricing, pressuring gold, while a softer PCE print (forecast 0.3%) could cement the current rally. Key levels to watch are the intraday high of 4658.3 and support around 4550. A clean break above 4658.3 could open the door to further upside. The pain trade for gold is a strong GDP print coupled with hawkish Fedspeak, triggering a sharp rise in real yields and a dollar rally.