Market update: gold prices experience little change after more central bank speak

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There wasn't much to cheer about when it came to US economic data on offer yesterday, the weekly mortgage applications out of MBA showing a 7.4% increase after a -9% reading last time around, and wholesale inventories for December up 0.1.

There was plenty of Federal Reserve (Fed) member speak however, Williams on the likelihood the central bank would take “smaller steps…to get to whatever we need to get to”, Cook that it’s “appropriate to move in smaller steps” to study the impact of tightening, Waller on the need to remain in a tightening monetary policy stance “for some time”, and Kashkari still believing the peak rate ought to be as high as 5.4%, and in turn higher than what is currently being priced in by markets.

As for Treasury yields, they finished the session lower though some of those losses undone as of writing this morning, in real terms falling back a bit, and breakeven inflation rates rising to levels unseen since early December. The CME's FedWatch is showing expectations of a fully priced in 25bp (basis point) rate hike with a tiny minority into 50bp for the next meeting in March, but that even if it doesn't get into the 5-5.25% range will do so by May (by a heavy majority).

Up next, it's relatively light with the weekly claims, while more interesting tomorrow with preliminary consumer sentiment and inflation expectations out of UoM (University of Michigan), as well as more Fed speak.

Gold Technical analysis, overview, strategies, and levels

A volatile technical overview usually shouldn't require a fundamental trigger to give conformist breakout strategies a clear edge like we saw late last week, but such has been the case with yesterday's 1st Resistance level holding causing conformist buy-breakouts to fail once more and not enough of a reversal to trigger contrarian sell-after-reversals.

In all, the technical overview remains unchanged but where ongoing oscillations would force a shift. Based on historic technical considerations and any oscillations now are usually the calm before the storm.

IG client* and CoT** sentiment for gold

There hasn’t been much of a change in retail trader bias due to the lack of a change in price, and still heavy buy even after dropping a notch to 66%, needing a larger recovery given where the additional longs were initiated (chart below, blue-dotted as % long; spike when prices dropped from $1,950 into sub-$1,800 region).

Retail trader bias in silver is much higher at extreme buy 87%, platinum retail just beneath at 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, though given the latest report has been delayed, the outer circle is as of the week before, inner circle week prior to that.