Gold prices fall, as US bonds experience an increase

On Tuesday, the risk markets experienced marginal gains or remained steady amidst calm trading, despite recent banking turbulence. The markets were reassured by First Citizen's partial takeover of SVB and the large amount of US dollar liquidity available. Traders are now focusing on important US growth and inflation data to be released later in the week.  

Although the banking sector has stabilized, the recovery has been slow, and it still carries significant losses from the earlier sell-off this month. US Treasury yields have risen in the past few days after a week of flight-to-safety, which led to US bond yields declining along the curve. The current US rate probabilities show a 50/50 chance of a 25bp rate hike at the May meeting before pausing.  

Markets are now pricing in two 25bp US rate cuts by the end of the year and at least another four quarter-point cuts in 2024. The core PCE, the latest look at US inflation, will be released on Friday at 13:30 GMT, and analysts forecast a month-on-month decline to 0.4% from 0.6% in January, while the core PCE y/y is expected to remain constant at 4.7%. 

Gold is struggling, and its value is trading around $1,960/oz. It has found support at $1,948/oz. and then $1,935/oz., while resistance is expected on either side of $2,000/oz. before its recent one-year high at $2,010/oz. Retail trader data shows that 59.23% of traders are net-long, with a long-to-short ratio of 1.45 to 1.  

Since traders are net-long, it suggests that gold prices may continue to fall. Moreover, traders are even more net-long than yesterday and last week, and with recent changes, this gives a stronger gold-bearish contrarian trading bias. 

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