This week’s gold market has turned on a familiar pressure point. The return available from U.S. bonds rose while bullion offered no yield. The move in rates is measurable, as the Treasury’s 10-year real par yield rose from 2.63% on November 6 to 2.86% on November 12, a 23-basis-point increase. The 10-year nominal yield also climbed from 4.86% to 5.10%. November 11 was a market holiday, so there was no Treasury observation for that date.
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Higher real yields lift the opportunity cost of holding gold, and the correction, although not automatic, is one that most traders will be cognizant of. Inflation data offered no clean offset. October CPI rose 0.4% month over month, while core CPI increased 0.3%, matching the prior 2 months. Friday’s PPI release showed final-demand prices up 0.3% in October after September’s 1.4% increase. Yet the annual PPI increase accelerated to 6.5%, the largest 12-month rise since November 2022. The narrower final-demand measure excluding food, energy, and trade services rose 0.5% for the month and 4.9% from a year earlier.
The monthly slowdown is a bit of a relief. The annual and core readings have left the inflation-policy question open, though. Thursday’s oil rally renewed concern about the Middle East, adding another complication. Gold did not behave as a simple inflation hedge during the sell-off. Higher oil prices have raised concerns that inflation could be a reason for policy to remain restrictive in the United States, while elevated yields and a firmer U.S. dollar weighed upon bullion.
The Weekly Bias Is Cautious
The market needs to see real yields turn lower before the safe-haven argument can carry the price by itself. There seems to be support near $3,850, and a hold above there would give bulls at least something to hang their hat on. The rebound has stabilized price after a very fast drop but has not yet reversed the higher-yield backdrop. A sustained move back above $4,000 would improve the short-term picture. Failure to hold above $3,850 could strengthen the bearish case.
Next week, we have 2 useful pieces of data. The delayed CFTC positioning report is scheduled for Monday, November 16, due to the Veterans Day holiday this week. Its data could show whether the latest fall produced more long liquidation or new short positions.
The Federal Reserve will publish minutes from its October 27 and 28 meeting on Wednesday, November 18, at 2 p.m. Eastern Standard Time. A more persistent discussion on inflation and further tightening would keep pressure on gold. Evidence that policymakers see recent rate repricing as sufficient could help settle yields to the downside.
Technical Analysis
That being said, the technical analysis for this chart looks rather weak. Breaking below the previously mentioned $3,850 level would be a very negative turn of events, perhaps putting the $3,500 level in focus, as it was a previous resistance level and market memory could focus on that. A close above $4,000 would at least be the beginning of something constructive, while a weekly close above $4,200 would have me even more bullish.