Market update: gold prices drop as strength in yields aids the greenback
Retail traders have raised their buy bias in gold, silver and platinum, even as the technical overviews point to bearish signals.
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Treasury yields finished yesterday’s session higher and stronger on the further end but didn't translate into higher readings when viewed in real terms, and breakeven inflation rates edged slightly higher again.
As for market probabilities when it comes to future Federal Reserve (Fed) rate hikes, the CME's FedWatch shows expectations of a 25bp (basis point) rate hike for March, a heavy majority of another 25bp for May, and a slight majority yet another increase of the same magnitude by July.
In terms of economic data out of the US, it was retail sales in focus, and the month of January showed month-on-month (m/m) strength of 3% easily besting estimates with its core which excludes autos up 2.3%.
Other data included industrial production for the same month unchanged, business inventories for December up 0.3%, Empire’s manufacturing improving sizably from -32.9 to -5.8 for February, and in housing the weekly MBA's (Mortgage Bankers Association) mortgage applications down 7.7% but NAHB's (National Association of Home Builders) housing market index for this month rising from 35 to 42.
More housing data is on offer today with building permits and housing starts, otherwise, there's the Philly Fed survey, the weekly claims, and pricing PPI (Producer Price Index) on offer today and trade pricing data tomorrow.
Gold Technical analysis, overview, strategies, and levels
We got a move past its previous 1st Support level with intraday lows that weren't far off its 2nd Support, aiding conformist sell-breakout strategies but where contrarian buy-after-reversals didn't trigger on the lack of one.
In terms of the technical overview, it’s been turning more negative (the technical overviews for platinum and palladium both ‘bear trend’, silver a ‘bear average’, and the gold/silver ratio briefly breaching 85 for two consecutive sessions but back within the 84 handle as of writing this morning).
IG client* and CoT** sentiment for gold
Retail trader buy bias has risen further into heavy buy territory here at 72% following the price drop from 67% yesterday morning. Retail trader bias in silver is much higher and increased to an extreme long 87%, and so too platinum at an even higher 88%.
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. However, given the report has been delayed, outer circle is as of January 24, inner circle January 17.
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