Yields fell across the entire curve: 30-year bonds - 5.42% (down more than 8 basis points), 10-year - 5.079% (also down 8+), 2-year - 4.745% (down 5+). The less bonds pay, the weaker the argument for keeping money in them rather than in gold, which pays no interest.
The trigger was the producer price index (PPI - prices at the factory and supplier level, a precursor to consumer inflation). In September it rose 1.3% for the month - the strongest gain since March 2022, 6.3% year-on-year; the core reading +0.7% for the month and 5.0% for the year. The data came in above forecast on Thursday, but bets on a rate hike as early as October weakened after them - hence the drop in yields.
Based on rate futures, the market is pricing in at least one 0.25 percentage point hike before the end of the year, and the probability of such a move in December according to CME FedWatch is above 90%. TD Securities notes that algorithmic funds (CTAs, which trade trends) are closing short positions in precious metals. Inflows into gold exchange-traded funds and central bank purchases remain strong.
Fed Chair Kevin Warsh speaks today - at the annual IMF and World Bank meetings. The assessment of the tone of his speeches by FXS Speechtracker is 5.6/10 versus a baseline of 6.1. Before that, the Fed's Hammack gave a moderately hawkish signal with a score of 7.2/10.
Near-term chart levels: support $4,035, resistance $4,200, the 100-day moving average around $4,245.
Did you catch this bounce in gold?
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