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Gold Price Outlook – Sellers Remain in Control as US Treasury Yields Jump

Gold Price Outlook – Sellers Remain in Control as US Treasury Yields Jump

Nick Cawley, Senior Strategist


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Gold Price (XAU/USD), Chart, and Analysis

  • UST 2-year yields are back at highs last seen in March 2020.
  • Gold breaks below $1,800/oz.
  • Wednesday’s US PCE release the next driver for the precious metal.

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The re-election of Jerome Powell for another four years at the helm of the Fed, while expected, added a dose of volatility across a range of asset classes yesterday with gold one of the big losers on the day. US Treasury yields ticked higher as markets continued to price in higher rates next year and beyond, while a weak 2-year notes auction later in the session pushed yields higher. The $58 billion sale of interest-rate sensitive 2-year notes priced at a high yield of 0.623% with dealers left holding 37.21% of the sale compared to a six-month average of 25.4%. Last month’s 2-year sale was priced with a high yield of 0.481%. The yield on the 2-year is now at its highest level in 19-months.

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With inflation currently running at a 30-year high in the US, prompting renewed calls for the central bank to tighten monetary policy, non-interest-bearing gold remains under pressure. The precious metal fell through the 38.2% Fibonacci retracement level of the March-August 2020 move at $1,837/oz. with ease, post Powell re-election, and today slipped below $1,800/oz. The next level of support is the 50% Fibonacci retracement level at $1,763.5/oz.

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Gold (XAU/USD) Daily Price November 23, 2021

On Wednesday, the Fed’s favored gauge of inflation, core PCE, is released with the y/y price index expected to rise to 4.1% from 3.6% in September, while the m/m reading is seen rising to 0.4% from 0.2%. Any significant deviation from these expectations will add extra volatility to the precious metal market.

Retail trade data – see below- shows traders increasing their overall holdings of gold with net-longs increasing and net-shorts decreasing.

Retail trader data show78.21% of traders are net-long with the ratio of traders long to short at 3.59 to 1. The number of traders net-long is 18.82% higher than yesterday and 15.77% higher from last week, while the number of traders net-short is 28.11% lower than yesterday and 39.03% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall.Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Gold-bearish contrarian trading bias.

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What is your view on Gold – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.