Gold, XAU/USD, Treasury Yields, ETF Flows – Talking Points
- Gold prices remain under pressure as Treasury selloff continues
- ETF holdings hit fresh multi-month low as retail ditches GLD
- XAU/USD price breaks below technical level on weakness
Gold prices continued to struggle as traders priced in a higher rate environment in 2022 as central banks around the globe move to tighten monetary policy. The Federal Reserve’s September rate decision caused a selloff in Treasuries after the policy statement hinted that tapering balance sheet growth is nearing. While tapering asset purchases doesn’t guarantee subsequent rate hikes, that is largely seen to be the case in this scenario – evidenced by the reaction in Treasury yields.
Meanwhile, the broader market is seeing a wave of risk aversion. The US Dollar has benefited from that move, especially given the bearish backdrop in Treasuries. A stronger US Dollar makes gold more expensive for foreign buyers. Persistent price pressures are also pushing yields higher, with surging energy prices adding to the argument against the Fed’s transitory inflation narrative. St. Louis Federal Reserve President James Bullard reinforced the central bank’s hawkish outlook and said inflation is set to run over target through 2024.
Gold is also showing weakness through ETF fund flows. Exchanged-traded funds (ETF) are a type of security that allows many retail traders to gain exposure to gold. Total holding for Gold tracking ETFs fell to the lowest level since May this past week. Outflows from ETFs are generally considered to show a bearish outlook for the underlying asset.
Gold Technical Forecast
Gold prices broke through the 38.2% Fibonacci retracement from the July/August move after the Fib level offered support over the past several days. That downside break opens the 23.6% Fib at 1717.87, which was last tested in early August. RSI moderated above the oversold 30 level, while MACD remains oriented lower.
Gold Daily Chart
Chart Created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
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