Gold: another session finishes in the red

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Gold prices and geopolitical influence

Gold prices remain well above the trough seen last month when geopolitical risk was being factored into the market, a dynamic that helped counteract the negative impact of rising yields that typically undermines the price of non-yielding precious metals.

Of late, we've observed the dissipation of the geopolitical risk premium, especially in the energy markets, partly attributable to concerns over demand following weaker global economic data. This development is considered bearish given the other underlying factors at play.

Economic indicators and Treasury yield trends

Treasury yields concluded yesterday's session lower, a continuation of a trend where they've also fallen in real terms, with breakeven inflation rates receding once again. However, there remains a significant disparity when considering real yields alone in the context of current gold prices, which continue to be buoyed by a variety of factors enabling them to 'defy gravity', so to speak.

Federal reserve outlook and market data

Data out of the US has been scant, with weekly mortgage applications reporting a 2.5% increase and September's wholesale inventory figures showing an unexpected growth of 0.2%, the latter being a slight negative in the present economic climate. This follows successive declines in mortgage applications due to high interest rates.

Fed speak and insights

Commentary from Federal Reserve (Fed) members included remarks from Cook, who noted subdued growth among key trading partners and the implications of geopolitical factors, while Jefferson expressed concerns over the market's expectations of a tepid monetary policy response. Fed Chairman Powell also made remarks, albeit not on monetary policy, and is slated to address the topic in a panel discussion today.

Furthermore, the outcome of the 30-year bond auction, following on from the 10-year one, will be closely scrutinised for insights into investor demand relative to the increased Treasury supply.

Gold technical analysis, overview, strategies, and levels

Another pullback in price occurred yesterday, dropping below its previous daily first support level and triggering stop-losses for contrarian buy-after-reversal strategies, while favouring conventional sell-breakout tactics given the current technical overview that is characterised as 'volatile' in both daily and weekly time frames. Despite this, intraday action has been limited.

Concurrently, this movement has nudged at-risk technical indicators into negative territory and resulted in a bearish cross on the daily Directional Movement Index (DMI). Key daily moving averages lie just below the current price levels, suggesting that further signals may be forthcoming with relative ease.

IG client* and CoT** sentiment for gold

As for sentiment, the majority of retail traders remain on the buy side, with the recent pullback in price slightly reducing the bias to 61% as of this morning. Commitment of Traders (CoT) speculators have been gradually increasing their buy bias to a significant 73%. However, after the latest pullback in price, we might see future sentiment readings decline slightly based on their typical positioning habits.

Gold chart with retail and institutional sentiment

• _{*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the previous trading day.}
• _{**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.}