Gold prices drop as real yields rise following FOMC minutes

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The latest minutes out of the US Federal Reserve’s FOMC (Federal Open Market Committee) meeting showed policymakers were not inclined to pull back on rate hikes until a substantial drop in inflation, reliant on data, and some officials wanted a more restrictive stance. As for central bank speak, we heard from the Fed's Bowman expecting more women in the workforce, and up next George is scheduled to speak in the evening.

Economic data out of the US showed (1) retail sales for July unchanged with its core that excludes automobiles up 0.4% (figures aren't inflation-adjusted), (2) business inventories for June rise 1.4%, and (3) in housing the weekly mortgage applications release out of MBA showing a 2.3% contraction. We've got more housing data with existing home sales, the weekly unemployment claims, and the Philadelphia Fed’s manufacturing survey after the nasty miss on Monday from the Empire index.

As for the bond market, yields were little changed on the front end by the close and in for gains on the further end taking real yields higher with it, breakeven inflation rates in for a slow average lower. Market pricing following all that is still bent on a 50bp (basis point) rate increase for September out of the Fed, and a peak by majority in the 3.5-3.75% range.

Gold Technical analysis, overview, strategies, and levels

Prices as of writing are currently hovering near their previous 1st Support level, which managed to hold in yesterday's session offering more for contrarian buy-on-reversals and little (thus far) for contrarian sell-breakouts. With the overview unchanged in both time frames (where the weekly it remains 'bear average' on a longer-term negative technical bias). Furthermore, there’s been a negative DMI (Directional Movement Index) cross occurring in this time daily time frame.

IG client* and CoT** sentiment for Gold

In sentiment, retail traders remain in heavy buy territory and just shy of extreme long at 77% as of this morning, rising from 75% yesterday prior to the post-FOMC price drop. It’s a higher long bias for both platinum (at 86%) and silver (at 87%).

CoT speculators according to last Friday’s report are at a lower but still heavy buy 71%, with CoT silver slight buy 52%, platinum also slight buy and just above the middle at 51%, and palladium an opposite heavy sell 71%.

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.