In recent developments, the trajectory of US interest rates has cast a shadow over the once soaring gold and silver markets, leading to a consolidation phase. Market projections indicate that the pricing of the initial 25 basis point rate cut in the United States is now fully factored in for the December meeting, although the possibility of a cut in the November session remains viable. Bolstered by robust economic indicators, the Federal Reserve finds itself with greater flexibility to sustain relatively higher interest rates in its ongoing battle against persistent inflationary pressures.
Following its surge to a fresh multi-decade peak on May 20th, gold has witnessed a decline exceeding $100 per ounce, fueled by escalating speculation regarding the Fed’s inclination towards rate hikes and bolstered by robust economic data. The continual elevation of short-term US Treasury yields exerts downward pressure on both gold and silver, with the latter facing the prospect of further challenges unless the Personal Consumption Expenditures (PCE) data on Friday diverges significantly from expectations. In the event of a continued downturn, gold is anticipated to encounter initial support at approximately $2,280 per ounce.
Analysis of retail trader sentiment reveals that 63.97% of traders are currently positioned on the long side, with a long-to-short ratio of 1.78 to 1. The number of traders holding long positions has increased by 3.95% compared to the previous day and surged by 36.52% from the previous week, while the number of short positions has risen by 6.68% day-over-day, albeit declining by 20.68% from the prior week.
Conventionally adopting a contrarian stance towards crowd sentiment, the prevailing net-long positioning among traders suggests a potential continuation of the downward trajectory in gold prices. While the current sentiment is marginally less bullish compared to the preceding day, it remains notably more optimistic than the previous week. The juxtaposition of existing sentiment and recent alterations in positioning underscores a nuanced bias in gold trading.
Meanwhile, silver has outpaced gold performance-wise over the past month, with the silver/gold spread now revisiting levels last witnessed in mid-November 2021. A decisive breach and sustained elevation above the mid-October 2021 peak would provide further impetus for this spread to ascend.
Notably, silver recently achieved its highest valuation in over a decade, effortlessly surpassing the $30 per ounce mark. This milestone, reinforced by a previous peak at $29.80 per ounce, now assumes the role of a pivotal short-term support level, underpinning silver’s current buoyancy.
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