Where we are: Gold is trading around $4,605, down from an overnight high of $4,620. Bullion is struggling to maintain its gains from the previous session, facing resistance around the $4,625 level. The price is currently below yesterday’s New York close, reflecting the pressure from rising real yields.
What’s driving it: Rising US real yields are the primary headwind for Gold. The US 10Y real yield has climbed to 1.96%, a 4.0bp increase since Wednesday, diminishing the appeal of non-yielding assets. While central banks continue to monitor inflation, the ECB press conference yesterday offered no new hawkish signals. The modestly long positioning in Gold futures, with net non-commercial positions at the 25th percentile, doesn’t offer a strong buffer against further yield increases.
- US 10Y Real Yield (TIPS) rose 4.0bp since Wednesday, increasing the opportunity cost of holding Gold.
- Net non-commercial positioning in Gold is only modestly long, leaving room for further liquidation if yields continue to climb.
- The ISM Manufacturing PMI and Prices Paid data at 10:00 ET will be crucial in determining the near-term trajectory of yields and, consequently, Gold.
NY session focus: All eyes are on the ISM Manufacturing PMI and Prices Paid data due at 10:00 ET. A strong print on both could accelerate the rise in yields and put further pressure on Gold, potentially testing support around $4,580. Conversely, a weaker-than-expected reading could provide a temporary reprieve. The trade at risk is long Gold / short US rates, given the persistent upward pressure on real yields. The pain trade is a significant risk-off move that drives demand for USD and safe haven assets, simultaneously weakening Gold as a commodity, and strengthening it as a hedge.