(Kitco News) – The Treasury Department and the Federal Reserve are sending mixed signals to the market, but recent events have been net negative for gold on balance, with prices retreating and bond yields on the rise across the globe, according to the World Gold Council (WGC).
“The US Treasury ‘appears’ to want lower yields. The Fed wants lower inflation. Neither wants to break the economy, which may be the blunt way to achieve both,” WGC analysts wrote on Tuesday. “Of the two, the Fed has more firepower. So, when Fed chair Warsh struck a hawkish tone last Friday, markets lurched. A sharp jolt to the 2-year yield, reflecting expected tightening ahead, saw gold retreat below its 200dma.”
The analysts noted that the release of still-hot U.S. inflation data and Warsh’s hawkish speech at the Jackson Hole Symposium boosted bets on near-term Fed hikes, increasing gold’s perceived opportunity cost and reducing its appeal. “Meanwhile, global gold ETF inflows continued, albeit at a slower pace; futures net longs rose, while options’ aggregated bullish positioning pulled back slightly.”
Turning to the technical picture, WGC analysts said gold is at risk of a pullback to its 55-day average as short-term momentum turns lower and global bond yields continue to rise.
“Gold strength has extended to just shy of resistance from the 50% retracement of the 2026 fall and May high at US$4,769/oz – US$4,774/oz and the subsequent sharp setback has seen the market fall back below its 200-day average to leave the market in what may be a developing sideways range,” they wrote. “With daily RSI momentum completing a top […] and with net long positioning having risen sharply we see scope for a deeper setback in this range, especially in light of the rise we are seeing globally for bond yields.”
“Support is seen initially at the mid-August low at US$4,311/oz and then more importantly at the rising 55-day average, currently seen at US$4,215/oz,” the analysts said. “Our bias would be to look for a floor here again. Resistance is seen initially at the 13-day exponential average at US$4,474/oz, then the 200-day average, now seen at US$4,530/oz. [A move back] above this latter level would be seen to turn the near-term trend higher again, with resistance then seen back at the US$4,696/oz recent high, then US$4,769/oz – US$4,774/oz.”
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