Gold prices jump following yesterday’s FOMC announcement

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The US Federal Reserve raised rates by 0.25% as expected to take it into the 4.5-4.75% range, in its statement pointing to inflation easing "somewhat" but “anticipates that ongoing increases in the target range will be appropriate”.

Thereafter, its Chairman Powell said in his press conference that "the disinflation process has started" with recent data showing "a welcome reduction in the monthly pace of increases" even if “cautious about declaring victory…because we’ve got a long way to go”, wanting "substantially more evidence to be confident that inflation is on a sustained downward path", and a labour market that “continues to be out of balance”.

The latest in terms of probabilities (CME's FedWatch) is another 25bp (basis point) rate hike in their meeting next month by a decent majority but not reaching a peak of 5-5.25% thereafter. As for Treasury yields, they finished the session notably lower and so too in real terms.

There was also plenty of data to digest, manufacturing still in contraction (ISM's reading at 47.4 with its pricing component at 44.5 and employment at 50.6, S&P Global's at 46.9), the focus on labour with ADP's non-farm estimate showing growth of a weaker 106K, and job openings rising to 11m.

More labour data today with the weekly unemployment claims that were preceded by Challenger's job cuts, before we get Non-Farm Payrolls (NFP) tomorrow followed by services PMIs (Purchasing Managers’ Index). On the US fiscal front, no breakthrough just yet but “we can find common ground” according to the House speaker after his meeting with US President Biden.

Gold Technical analysis, overview, strategies, and levels

Gold prices jumped after yesterday’s monetary policy announcement, settling above its previous 2nd Resistance level aiding conformist buy-breakout strategies as contrarians got stopped out. All its key technical indicators are flashing green usually signifying a bull trend even if stalling a bit at times, though historically more volatile at these levels and keeps it breakout vs. reversal when looking at conformist and contrarian strategies respectively.

IG client* and CoT** sentiment for Gold

In sentiment, retail traders shifted to the middle yesterday for the first time in four years, since then tilting back to slight buy 51% and avoiding majority sell territory for now. Price gains usually result in buy bias dropping and/or sell bias rising, though gold at times is an exception when it reaches euphoric levels enticing longs to re-enter in hopes of capturing further price gains.

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.