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By: Rhona O'Connell, Head of Market Analysis
Disappointing US numbers last week and at the end of the previous week have raised talk of a Fed pivot sooner rather than later. When it comes to market sentiment, perception is everything so even if these suggestions are premature (which in our view they are), they will colour expectations regardless. As a result we saw the dollar come off a little in the early part of last week and gold maintained the rally that had been built on the period of price consolidation that developed over August and September, before easing latterly.
The Federal Open Market Committee (FOMC) meets this week on Tuesday/Wednesday 1st and 2nd November. The markets are fully expecting a 75-basis point hike in the fed funds target rate (current rate is 3.25%) and had been looking for a further 75-point hike in December, but that has now been pared back and the current projection is for roughly 60 basis point cut; this would suggest that the markets are pricing in a 70% likelihood of a 75-point cut.
The chart below shows the U.S. yield curve, that of a month ago and below, the change. Clearly the short tenors have risen by a lot more than the mid-term, while at the long end, yields are up by a little more, with the 30Y (key for mortgages) up by almost 40 basis points over a month previously.
US yield curves, now and a month ago
Background
Metals
Gold and silver, 2022 to date
Market developments
Key charts
Gold in dollar terms, year-to-date; technical indicators. Still out of the downtrend and currently under pressure from the 10D and 20D moving averages
Source: Bloomberg
Gold, silver, the ratio and the correlation
Source: Bloomberg, StoneX
Gold (inverted) and the ten-year yield
Source: Bloomberg, StoneX
Gold and the S&P; ratio
Source: Bloomberg, StoneX
Gold and silver COMEX positioning, tonnes
Gold: -
Silver: -
Source for positioning charts; CFTC, StoneX
Source: Bloomberg, StoneX
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Gold's breakout has landed in a month that history has repeatedly favored, and the seasonal record stretching back to 2000 helps explain why. A closer look at August returns, win rates and how the calendar shifts into September shows where the seasonal edge is strongest and where it fades.
Silver's push above its summer range has less to do with supply and more to do with a single diplomatic thread. A potential U.S.-Iran deal has become the swing factor for a breakout that is far from confirmed.
A document with a substantial number of slides and text, built for the Front Desk internal call and analysing market developments, the economic and political background and key market parameters influencing the precious metals. This week includes material on the Precious Metals, notably Gold's lively action; Powell and the Fed, EU and potential margin compression
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