Gold prices finish higher despite hawkish FOMC minutes

Sign up for IG's Daily and Weekly Market Report to receive this information and more, in an elaborate and comprehensive report recounting the forex majors, commodities and indices before the European open.

Yesterday’s focus was largely on minutes from the latest FOMC (Federal Open Market Committee) meeting, and it showed policymakers "generally observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained path downward to two percent, which was likely to take some time" and cautioning "against prematurely loosening monetary policy" with a lack of a rate cut expected this year.

As for Treasury yields, they finished the session in the red once more, in real terms edging lower though still positive, breakeven inflation rates slightly lower and the 5y 5y forward inflation expectation rate unchanged. The CME's FedWatch is showing it's still a minority on getting a 50bp (basis point) rate hike this February, and roughly a coin toss on getting into the 5-5.25% range by May or even June.

Economic data out of the US showed ISM's (Institute for Supply Management) manufacturing PMI (Purchasing Managers’ Index) for December worsen to 48.4, its pricing component plummeting to 39.4, new orders a clear miss at 45.2, but its employment index out of contracting territory with a surprise 51.4.

Job openings for November (according to JOLTS) remained high and bested estimates at 10.45m, and in housing, the weekly mortgage applications out of MBA suffered a -10.3% reading. The focus is expected to remain on the US labour market with ADP's non-farm estimate, Challenger's job cuts, and the weekly unemployment claims on offer today before the market-impacting Non-Farm Payrolls tomorrow, services data also being released tomorrow out of ISM (and today out of S&P Global).

Gold Technical analysis, overview, strategies, and levels

We got a move past its previous 1st Resistance level, and thereafter just shy of its previous 2nd Resistance level, in all aiding conformist buy-breakout strategies in this time frame and keeping most of the key technical indicators positive or bullish with an ADX (Average Directional Movement Index) reading still not in trending territory just yet and an RSI (Relative Strength Index shy of overbought territory.

An overview that isn’t far off from a stalling bull trend, but where intraday volatility has picked up even if it hasn’t averaged back just yet over the past four sessions or so.

IG client* and CoT** sentiment for gold

As for sentiment, there’s been no change since yesterday for retail traders on hold at a heavy buy 65%, but there’s been a noticeable drop from heavier levels at the end of December prior to the recent bullish moves past $1,800 (see chart below, blue-dotted line as % long bias).

Retail trader bias in silver is near extreme long levels and has risen a notch to 77% as of this morning, while platinum is unchanged at an extreme buy 86%.

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.