Gold prices drop following yield spike

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It was a notable climb in bond yields that took real yields to fresh highs the obvious dent to the non-yield precious metal's price, and in the FX market, the US dollar was an outperformer. There hasn't been a significant change in pricing for November's rate hike nearly fully priced in on 75 basis points (bp).

In central bank speak, the US Federal Reserve’s (Fed) Bullard left the option for a hike of that magnitude open for both November and December meetings, and where they'll have to react if inflation doesn't fall as expected and going data dependent only after getting to the right rate level.

As for US economic data, mortgage applications suffered yet another decline down by 4.5% (demand at its lowest in 25 years), building permits were up 1.4% m/m (month-on-month) for September but housing starts dropping 8.1% for the same period. As for what’s on offer today and tomorrow, plenty of Fed members speak, more earnings and housing data, the weekly unemployment claims, and the Philly Fed manufacturing index.

Gold technical analysis, overview, strategies, and levels

Gold prices by yesterday’s close settled beneath its previous 1st Support level and beneath its stop loss as of writing this morning, aiding conformist sell-breakout strategies as contrarian buy-on-reversals got stopped.

It also tilted a couple more technical indicators (as of the close, not factoring this morning’s gains) into the red and in turn has its overview unchanged as a bear average for the daily time frame, and where it would have been a stalling bear trend if not for the channels prior.

IG client* and CoT** sentiment for gold

As for sentiment, there’s be no change in retail trader buy bias since yesterday both for gold at 82% and for platinum at 86%, with long bias in silver dropping a notch to 92%. CoT speculators according to last Friday’s release are still majority buy here at 64%, and so too in silver at a lower 54% and platinum at 57%, while opposite majority short palladium 58%.

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.