Gold's Failed Rally Reveals Dollar Strength as Market Driver
Gold's failed rally on soft inflation data and lower Fed hike odds is a clear sign that buyers are not driving the market, and that the US dollar strength is the real driver. On Wednesday, gold rose to $4,251 after the PCE report showed softer-than-expected inflation, but it quickly gave back those gains as yields and the dollar recovered.
The 10-year Treasury yield reached its 2007 peak of 5.30%, and gold futures settled at $4,186.70, up just $7 from the previous day. Spot gold kept falling into the close, ending the day lower near $4,157. Gold failed to rally on bullish news, a key indication that buyers are not present in the market.
On Thursday morning, hawkish data released, with the ISM report showing a jump in prices-paid index to 77.9 from 71.1, and the 10-year Treasury yield reaching 5.66%, a 24-year high. Gold opened about $28 higher near $4,214 but faded after the report.
The situation is more bearish than it was right after gold broke below the head-and-shoulders pattern on Sep. 29. The verification rebound that occurred earlier this week has failed to hold, and the next sizable move in gold is likely to be to the downside. Silver also failed to rally on bullish news, settling lower for its third consecutive day.