Gold has been stuck in a rut for the last week with any attempted break higher met with more forceful opposition. Gold is battling higher US Treasury yields, especially in the interest-rate sensitive short-end, that continue to dull the allure of the precious metal. The current situation is nothing new as UST yields have been rallying for months, but with little to no bullish impulses for gold, lower prices are likely.

The UST 2-year traded with a yield of 4.25% Thursday, yet another multi-year high. With the Fed’s interest-rate mantra of higher, faster, and longer, bond yields are expected to climb further in the months ahead, although the speed and size of any further move are likely to be restricted. Markets expectations are for Fed Funds to top out around 4.50%-4.75% in H1 2023, leaving a limited amount of room for short-dated yields to move higher.

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The weekly gold chart shows the precious metal testing support around $1,667/oz. again and a break below here leaves $1,617/oz. as the next technical target. The break below the 200-simple moving average is a fresh negative for gold.

GOLD WEEKLY PRICE CHART – SEPTEMBER 23, 2022

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Retail trader data show 82.46% of traders are net-long with the ratio of traders long to short at 4.70 to 1. The number of traders net-long is 0.50% higher than yesterday and 10.29% lower from last week, while the number of traders net-short is 7.66% higher than yesterday and 27.45% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.

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