Gold prices rise following plummet in yields and USD retreat

It was down to the Bank of England’s (BoE) intervention in the UK bond market to send global yields retreating, as they’ll be suspending initial plans to sell gilts from next week to the end of next month and instead temporarily buying up longer-dated bonds to "restore orderly market conditions" between now and mid-October selling them once the market stabilizes.

It’s a temporary move but did raise hopes of the camp believing a more global central bank pivot is still on the cards, especially if the BoE action persists for longer than planned.

US Treasury yields were also in for retreat as bond values rose but didn't translate into all bond yield inversions improving given larger losses on the 10-year. Real yields, however, were in for a clear retreat (and a plus for the precious metal given its non-yielding characteristics), and breakeven inflation rates were slightly higher but net averaging lower thus far.

It remains roughly a coin toss on whether we'll see a 75bp (basis point) or 50bp rate hike this November out of the US Federal Reserve (Fed), more notable that it's also close to the middle on whether it can get to 4.5-4.75% by March of next year.

As for US economic data, it was mostly a miss with

1. pending home sales -2% m/m (month-on-month) for August and bringing its y/y (year-on-year) reading to -24.2%,
2. weekly mortgage applications -3.7%,
3. preliminary trade deficit for August narrowing to -$87.3bn,
4. and preliminary wholesale inventories for the same month up a larger (and in turn worse) 1.3%.

GDP (Gross Domestic Product) and unemployment claims are up next but it's tomorrow's PCE (Personal Consumption Expenditures) readings and more than investors and traders are waiting for, with central bank members speaking as well.

Gold Technical analysis, overview, strategies, and levels

For gold prices, it was a welcoming sight and especially so with the US dollar in retreat in the FX market, going past both its previous 1st and 2nd Resistance levels aiding contrarian buy-breakouts (though difficult to say if it was a clear reversal of the 1st Resistance level triggering conformists). In all, it hasn’t shifted its technical overview from a current stalling bear trend, even if a few key technical indicators have moved into what is considered more neutral territory.

IG client* and CoT** sentiment for Gold

In sentiment, given the majority buy bias held by both retail traders and CoT speculators, any gains in price are a welcoming sight. But it’s still in extreme territory for the former, even after dropping from 82% as of yesterday morning to 78% today. CoT readings are from last week, an ongoing unwinding in long bias and down to a more moderate 59% from extreme levels back in April.

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.