Gold Upset By Soaring US Treasury Yields

US Treasury yields jumped overnight with the interest-rate sensitive 2-year printing a fresh 23-month high of 1.05%, while the benchmark 10-yearhit 1.83%, a level last seen in January 2020. Market expectations that the Federal Reserve will hike rates four times this year, by 25bps each time, and that the central bank will start to pare back the US balance sheet sometime later this year, are driving bond yields ever higher ahead of next week’s central bank policy meeting.

The scene for gold is still mixed to negative with the precious metal expected to remain within a $1,763/oz. to $1,837/oz. Fibonacci range. This multi-week range will likely tighten over the short-term with the Average True Range indicator (ATR) stuck at a near two-year low, highlighting the lack of volatility in the market.

The current moving average set-up is also mixed although a bearish ‘death cross’ did form a couple of days ago, adding a layer of bearish sentiment. On the downside, $1,800/oz. guards the January 7 multi-week low at $1,783/oz. ahead of the 50% Fibonacci retracement at $1,763/oz.

69.26% of traders are net-long with the ratio of traders long to short at 2.25 to 1. The number of traders net-long is 2.79% higher than yesterday and 9.27% lower from last week, while the number of traders net-short is 2.06% higher than yesterday and 1.93% higher from last week.

Crowd sentiment does explain a lot about the gold market today, and the fact traders are net-long suggests that gold prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed gold trading bias.