Gold has continued to trade within generally narrow ranges, but relatively hawkish comments from Fed’s Dudley triggered renewed selling pressure on prices.
Gold prices were confined to narrow ranges in US trading on Friday with a dollar retreat from its best levels curbing potential selling interest as prices held above $1,250 per ounce.
The latest COT data recorded a decline in the net, long, non-commercial positions to just above 190,000 in the latest reporting week from close to 205,000 the previous week and this was the first net decline in four weeks. The overall positioning data still suggests the potential for a liquidation of long positions if there is any strong rally in spot prices.
The latest data recorded a decline in Exchange Traded Funds gold holdings following the Fed rate hike which suggests a cooling of investor interest in gold.
Trading activity remained limited in Asian trading on Monday with gold again holding just above $1,250.
The dollar was able to resist further losses against the yen and US 10-year yields stabilised just above 2.15%. Equity markets maintained a firm tone in Asia as liquidity improved in the Chinese market and there was no significant defensive demand for gold.
After a quiet session ahead of the US open, there were comments from New York Federal Reserve President Dudley that he expected wages growth to strengthen over the next year or two. Crucially, he also stated that halting the tightening cycle now could imperil the US economy.
The relatively hawkish comments provided a renewed lift to the dollar with a move to the 111.30 area in USD/JPY while Treasuries moved into negative territory. The combination of a firm dollar and higher yields undermined gold demand with a retreat to 4-week lows and test of support below the $1,250 per ounce level.
Trends in bond yields and the dollar will continue to dominate in the short term with scope for some further measured downward pressure on gold and tests of key support levels if expectations of higher US interest rates are sustained.
The 100-day moving average comes in at around $1,248 with key support around the 200-day moving average close to $1.240.
Gold Prices 4-Hour Chart