Gold futures declined today, giving up $12.60 or 0.29% to close at $4,310.10, above the critical support level at $4,298. While this decline comes on the heels of yesterday’s $73 decline, the close above $4,300 points to gold being rather resilient on a day where yields on 10-year bonds spiked to 20-year highs, bringing the dollar higher along with it.
US 10-year Treasury yields hit a high today of 5.22% before settling at 5.20%, matching the highs reached in 2007 preceding the financial crash of 2008. This helped the US dollar strengthen against a basket of foreign currencies, bringing the US dollar index to 101.23 after a modest 0.14% rise on the day.
Another attack on Saudi Arabia sent oil prices higher by 2.66% over concerns of a supply disruption, with WTI crude oil closing above $94 a barrel at $94.61.
Silver declined by nearly a full percentage point, giving up $0.63 on the day while still closing above its 50-day simple moving average at $63.53, ending Thursday’s session at $63.80.
The rise in oil prices leading to higher inflation expectations has taken the chances of another rate hike at the October FOMC meeting to 65% according to the CME’s FedWatch tool. The same source also puts odds of two consecutive hikes, one in October and one in December, at 56.8%. This has been the major headwind for gold, but so far gold has managed to remain slightly above the lows seen after last week’s rate hike and updated dot plot. If gold can remain at current levels and not close below support at $4,298, then it may avoid further chart damage; tomorrow’s close is key because of this.
Support just beneath $4,300 in gold futures is critical because it represents a 61.8% retracement of the August rally. Gold needs to hold above this level to give any hope for a swift recovery.
From a technical standpoint, today’s session printed what many analysts would recognize as a hanging man candlestick just above that 61.8% retracement, a formation that often warns of further downside if it is not quickly negated by a strong bullish close in the sessions ahead. Gold remains inside its daily Ichimoku Cloud for now, a sign that the intermediate-term trend has not yet turned, though price is pressing on the cloud’s lower boundary. The 14-day RSI has cooled into the mid-40s, no longer overbought but not yet at the kind of oversold extreme that typically accompanies a durable low.
Silver’s chart tells a similar story in miniature. Its ability to hold above the 50-day moving average on a day when both the dollar and yields moved higher suggests underlying demand has not yet been shaken loose, even as momentum readings cool off from overbought territory. A daily close beneath $63.53 would open the door to a deeper pullback toward the 38.2% retracement of the same August advance that defines gold’s support near $4,298, a level that comes in closer to $61 for silver.
Beneath the day-to-day noise of yields and the dollar, the longer-term case for gold has not changed. Central bank buying has continued through the current quarter, extending a streak of accumulation that has now stretched across several consecutive years, and that steady official-sector demand has provided a bid under the market during each of this year’s corrective phases. It is this structural buying, more than any single day’s headline, that has kept pullbacks in gold comparatively shallow even as real yields climb toward levels last seen before the 2008 financial crisis.
With the October FOMC meeting now bearing down and rate-hike odds climbing alongside oil prices, both metals are likely to trade defensively in the sessions ahead, taking their cues from the bond market and the dollar rather than setting their own direction. Tomorrow’s close remains the line in the sand for gold: hold above $4,298 and the broader uptrend structure stays intact; lose it and the retracement levels from the August rally come back into focus as the next test of support.
