<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=2045119522438660&amp;ev=PageView&amp;noscript=1">

The gold price has been strong in recent months, rallying 16% from its late June lows and reaching an all-time high in late September (of $2,672). Since then, though, the price has lost some upward momentum, trading broadly sideways in recent weeks.

In particular, rising US rates/bond yields (and a stronger US dollar) have become a key headwind for gold (fig 1). Most notably, US macro data has been stronger than expected in recent weeks (see the Citi Surprise Index, fig 3). Markets have therefore dialled back their expectations of how aggressively the Fed will cut rates in this easing cycle. All of which has (started to) put some downward pressure on gold prices, which are a key barometer of liquidity.

Added to that changing interest rate (and dollar) outlook, gold is also vulnerable to the downside from a positioning, sentiment, and models’ perspective. In particular, net LONG speculative positioning is crowded (close to early 2020 pandemic levels, see fig 2); measured sentiment is bullish (and generating a contrarian SELL signal); while technical indicators are also at/close to their SELL thresholds. This weeks’ inflation report, as well as incoming data on the US labour market bears watching closely (as potential triggers for further repricing on Fed rate expectations).

Fig 1: US dollar index (scale INVERTED) vs. gold price (US$/oz)

 

1-Oct-08-2024-08-28-24-1040-AM

Fig 2: Gold net speculative positioning vs. gold price (USD/oz)

1a-3Fig 3: US Citi Econ Surprise Index vs. gold price (US$/oz), scale INVERTED

2-Oct-08-2024-08-28-54-1551-AM

Subscribe

Get the latest press coverage and blog updates to your inbox.