Gold in the spot and futures markets gave up all of its small gains after the close of the New York session and is now trading lower on the day. Gold futures rose $2.60 to trade at $1636.80 in New York trading today. However, that modest gain was wiped out after the New York markets closed and Globex opened. As of 3:51 p.m. EDT on a gold futures basis, the most active December 2022 contract is currently fixed at $1631.40, a net decline of $2.80, or 0.17%.
Silver futures also gave up much of their gains made through the close of trading in New York today. In silver terms, December’s most active contract rose $0.33 to close at $18.68. Silver is currently trading at $18.50 for a net gain of about $0.22 or 1.2%.
It seems like there is a group of traders who see gains, large or small, in gold and silver as an opportunity to dampen those gains by actively taking short positions.
The only day gold and silver closed positive on the day was Monday. These gains came after gold sold off last Friday at $1649.10, about seven dollars below Friday’s open price. Gold opened at $1,660 on Monday, traded at a high of $1,674 and closed around $1,664.
Monday’s high and close are currently the highest gold has seen this week. Although gold traded higher on Tuesday compared to Monday’s low, gold traded lower on both Wednesday and today than the previous day. Gold’s lowest low this week was $1626.30, just $5 off the yearly low. In the last 12 trading days, nine of those days resulted in red candles, meaning that gold closed below its open price on those days.
Gold’s recent bearish market sentiment was a direct result of market participants showing genuine concerns about impending 75 basis point rate hikes at the last two FOMC meetings of this year in November and December. Comments from several Federal Reserve officials have underscored their intent and focus on lowering inflation by raising interest rates. This has generally led to higher yields on US debt, including 10-year and 30-year Treasuries.
Yields have steadily increased to higher levels and continue to trade today. The yield on the 10-year note is up 2.4% today and currently stands at 4.226%. 30-year bond yields are up 2.18% and are currently yielding at 4.216%. There continues to be an inverse yield between 10-year notes and 30-year bonds, with the 10-year note offering slightly higher yields than the longer-dated debt instrument. This is an indication that investors and traders believe current yield levels are higher than they will be for years to come.
Recent statements by Federal Reserve Bank Governors James Bullard and Neel Kashkari have confirmed that they are trying to bring benchmark interest rates closer to 4½% or 5%. As long as the US Federal Reserve keeps raising interest rates, gold is likely to react negatively to higher interest rates rather than focusing on ongoing inflationary pressures.
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