Following modest gains on Tuesday, gold prices are stable in Asia-Pacific trade around the $1,650 mark. The small selling activity is explained by a somewhat higher US Dollar and rising bond yields. Government bonds in Australia and New Zealand are being sold off, which raises rates and reduces demand for gold.
 |
| Click the photo for a Larger view |
The Australian Dollar did not benefit much from a higher-than-expected consumer price index (CPI) but it appeared to encourage bond traders to sell. The headline figure of 7.3% over the prior year fueled hawkish predictions for the Reserve Bank of Australia (RBA) meeting taking place next week. A 25-basis point (bps) RBA raise has a 100% likelihood according to cash rate futures, which is a little firmer than the possibilities before the CPI.
Rate traders anticipate a 75-bps change when the Bank of Canada announces its interest rate decision tonight. A 3-in-4 possibility of such happening is reflected in overnight index swaps. Bullion prices would probably benefit if the BoC surprised market participants by raising rates by 50 basis points. Since October 1, the Canadian Dollar has increased in value relative to gold by around 2%, but the US Dollar has only increased in value by about 0.5%. With a 75-bps BoC increase, XAU/CAD might complete the monthly candlestick at its lowest level since 2022.
According to the Commitments of Traders (COT) report released on Friday, bullish gold speculation decreased. Also, according to CFTC data for the week ending October 18, speculative longs (orange line) decreased by 7,051, while speculation shorts (blue line) surged by 14,974. As a result, the net long position decreased by 22,025 to 69k, close to its lowest level since April 2019. It's hardly good news for the yellow metal if non-commercial traders lack faith in the gold market. Selling into strength can be a wise choice in the near future.
0 Comments