Gold update: prices rise as yields drop following FOMC decision

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There was little to go on in terms of US economic data yesterday. The weekly mortgage applications showing a small 3% increase with the drop in mortgage rates a welcoming sight for the industry, and that meant attention was on the Federal Open Market Committee (FOMC) event.

The latest FOMC decision involved a 25bp (basis point) rate hike taking its key rate into the 4.75%-5% range. There were changes in its statement, the notable one being its previous "ongoing increases...will be appropriate" to the current "some additional policy firming may be appropriate" raising hopes of a pause that was discussed, though on pricing removing their reference to inflation easing.

The latest projections (‘dot plot’) pointed to one more rate hike out of the US central bank, and its Chairman Powell acknowledged tighter financial conditions that if sustainable "could easily have a significant macroeconomic effect", but that participants "don’t see rate cuts this year".

Growth projections were reduced for this year and the next, with little changes in pricing forecasts and employment.

It was generally seen as a dovish hike, the greenback falling in the FX market, and Treasury yields finishing the session notably lower and for most of the curve undoing gains made the session prior, in real terms a clear drop, with breakeven inflation rates undoing losses made over the past five trading sessions.

As for market pricing (Refinitiv) of future rate hikes, via majority showing one more the final 0.25% increase.

And while a dovish hike out of the Federal Reserve (Fed) might be seen as a positive for risk appetite, there were comments from US Treasury Secretary Yellen that needed digesting, specifically that she's not considering a "blanket insurance or guarantees of deposits" for US banking deposits without approval by Congress.

As a result, First Republic Bank shares and US regional bank ETFs were back in retreat.

Up next, we've got more housing data with new home sales for February, Chicago and Kansas Fed activity indices, and the weekly claims, and tomorrow there's durable goods data and preliminary manufacturing and services PMIs.

Gold technical analysis, overview, strategies, and levels

Volatile moves here once more, in yesterday’s session going past its previous 1st and 2nd Resistance levels stopping out contrarian sell-after-reversals and easily giving conformist buy-breakouts the win.

There’s been plenty to process on the fundamental front be it the latest central bank decision or the banking crisis. For absent a non-technical trigger and before all this, levels had a much better chance of holding.

IG client* and CoT** sentiment for Gold

As for sentiment amongst retail traders, unchanged since yesterday despite the big price gains, opting to hold at a majority buy 61%. Retail trader bias in silver is still in extreme long territory and at 86%, matching retail sentiment in platinum.

Amongst the larger speculators, the latest CoT report released two days ago with positioning as of last Tuesday shows they’ve raised their long bias in the precious metal from 65% to a heavier 72%, CoT silver shifting to the middle from a previous slight sell 54%, platinum majority buy rising to 62%, and palladium not just an opposite majority short but in extreme sell territory at 79%

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.