Sep 27, 2022 8:00 AM +05:00
VOT Research Desk
Key Insights
XAU/USD, Treasury Yields, US Dollar, Economic Data, PCE, COT Data.
Traders are focusing on US economic data, including PCE and durable goods COT data, which revealed that speculators are becoming less confident in bullion/Gold. Gold prices are staging a modest recovery during Asia-Pacific trading as equity markets search for direction following a selloff on Wall Street.
As stocks moved lower and the USD moved higher throughout New York trading, bullion prices fell by more than 1%.In recent weeks, speakers at the FOMC have made it abundantly clear to markets that the hawkish outlook for rate hikes at the Federal Reserve has strengthened.
Loretta Mester, president of the Cleveland Fed, made a statement on Monday that the Fed should “act more aggressively,” sounding more hawkish than ever.
Speaking from the Massachusetts Institute of Technology, Ms. Mester went on to say, “Further increases in our policy rate will be required.”The 10-year Treasury yield reached its highest level since April 2010 at 3.931%.The US dollar also saw general strength, rising by about one percent.
Gold’s appeal as an investment typically suffers when US yields rise and the dollar rises.
Gold speculators reduced their bullish position by 12k contracts for the week ending September 20 according to the CFTC’s Commitments of Traders (COT) report, which was released on Friday.
Since June 2019, that is the lowest position among non-commercial longs.
The net long position decreased to 60.7k contracts as shorts increased by 21.7k contracts.
The change indicates that traders are less optimistic about the metal.
However, the increased short position also makes gold vulnerable to a rally in the event that prices rebound and shorts are forced to cover.
On September 30, the Personal Consumption Expenditures Price Index (PCE) for August is due.In August, analysts anticipate that the core PCE component, which excludes volatile energy and food prices, will increase by 4.7% year-over-year.
That would be an increase from 4.6 percent in July, which is not exactly a good sign for the Federal Reserve. Gold prices would likely be further crippled if the print came in hotter than expected. Currently, Fed funds futures forecast a 78.3% probability of a 75-basis point increase at the November 2 FOMC meeting.
In the meantime, durable goods orders for August and consumer confidence for September in the United States may shed more light on the economy, which may have an effect on FOMC rate hike bets and bond yields.
