Gold prices fell 4.6%, weighed down by a stronger dollar and real interest rates of 2.86%.
① This week’s one-sentence summary
For those tracking gold, the key development this week was the failure of the $4,000 level to hold, resulting in a 4.6% decline for the week. Persistently high real interest rates and a strong dollar, along with a decrease in the Commitment of Traders (COT) long positions, weighed on prices.
② Price Trends and Chart Review
Gold began the week at $4,074.30 and ended at $3,886.30. The weekly change was -4.61%. During the week, it rose to $4,157.70 but fell to a low of $3,856.70. The weekly range from the opening price was significant at 7.39%, marking a week of dramatic shifts in direction around the $4,000 level.
The observed condition last week of “maintaining a closing price of $4,000” was not met. Furthermore, the previous week's low of $3,889 was slightly breached. Last week’s rebound was retraced before shifting to a sustained uptrend. On the other hand, the price has retraced approximately $30 from the weekly low to the closing price, and buying interest emerged in the $3,850 range.
20-day realized volatility was 25.30% annualized. This corresponds to the 82.52 percentile over the past 3 years, indicating larger-than-usual price fluctuations. The closing price is 13.13% lower than it was 3 months ago, and the situation continues where a short-term bounce alone is unlikely to mark the end of the adjustment.
Weekly prices are from the input data's futures series. Spot prices used with the gold/silver ratio below are from Stooq’s end-of-day closing series.
Source: Stooq end-of-day spot close series (xauusd / xagusd).
The gold-silver price ratio was 79.26, a 0.76% rise compared to the previous week. This indicates that silver was relatively weaker, not just gold. However, the rise in the ratio alone cannot be interpreted as a strengthening of demand for gold as a safe-haven asset.
③ Investor Activity
As of the CFTC COT report on November 3rd, Money Manager net longs were 103,614 contracts. This consisted of 122,283 contracts bought and 18,669 contracts sold, a net position that has decreased by 1,948 contracts from the prior week. The “halt in the decrease of net longs” that was highlighted in last week’s report could not be confirmed.
COT data are released later than prices, so these figures do not directly indicate the downtrend in the latter half of this week. Nevertheless, it is important that speculators did not increase their long positions when the price recovered above $4,000. This was not an active confirmation of the price rebound by institutional investors.
The buy-sell ratio is at the 37.25 percentile over the past 1 year. While extreme position overheating is not observed, signs that remaining strength will translate into actual buying are still weak. Next, we will confirm whether the buy-sell ratio can maintain 10万 shares or if the decline will stop.
④ Macro Factors Check
The weight on gold is the combination of interest rates and the dollar. The yield on US 10-year Treasury bonds rose to 5.10%, and the proxy value for real interest rates reached 2.86%. This has likely made it difficult for gold to establish a foothold in the $4,000 range, as the opportunity cost of holding interest-free gold has increased.
The dollar index was at 121.88. Although the observation date of November 6 is old, it is at the 99.18 percentile over the past year, and the pressure for a stronger dollar remains strong. The breakeven inflation rate was unchanged at 2.24%. This reflects a situation where inflation expectations are not offsetting the rise in nominal interest rates, resulting in higher real interest rates.
The VIX rose to 18.7, but remains at a lower level than during the sharp rise of the previous week. Demand for safe assets alone has not been enough to overcome the headwinds from interest rates and the dollar. A basic explanation of the relationship between gold prices, real interest rates, and the dollar can be found here.
Source: weekly input dataset; DXY, U.S. rates, VIX, WTI and credit spread snapshots.
⑤ Supply and Demand and Sentiment
Website sentiment, adjusted based on 36 news items, averaged negative 0.114 for the week. The most recent value has rebounded to positive 0.15. While a cautious stance remained throughout the week, the outlook became less uniformly pessimistic towards the weekend.
Google Trends' "gold price" search interest shows a recent value of 74 for the 3-month series, up from the previous observation of 66. In contrast, the weekly value for the 1-year series is 24, down from 31 the previous week. Due to differing aggregation frequencies, we avoid comparing absolute values and interpret this as a recovery in short-term interest and a slowdown in the long-term series.
Source: Google Trends daily 3-month series (gold price).
COT long positions are decreasing, the weekly average sentiment is negative, and the long-term search interest is declining, all of which indicate a lack of conviction among participants. However, recent sentiment and short-term search interest have improved. Whether this renewed interest following the downtrend will lead to actual buying will be the next focus.
Source: site-corrected article sentiment and Google Trends snapshots.
⑥ This Week’s Insights and Next Week’s Key Points
This week’s finding is that interest rates and the dollar’s headwinds have resurfaced, without confirmation from the Commitment of Traders (COT) of last week’s price rebound. Last week was characterized by “high prices, declining COT positions, and deteriorating sentiment.” This week, prices have also fallen, and the market has adjusted to reflect weak participation.
Confirmation of an uptrend requires that the price first closes above $4,000. A decline in the proxy value of real interest rates from 2.86%, a halt in the decrease of COT bullish positions, and a return to positive sentiment on a weekly average would allow for an easier interpretation of this week’s decline as a shakeout.
The neutral condition is for the price to find support around the $3,850–4,000 level. If COT data and sentiment stabilize within this range, the market will take time to re-establish pricing after the sharp decline. This is a phase of waiting for volatility to contract without committing to a specific direction.
In a bearish scenario, we will look for a clear break below $3,850. If the US 10-year Treasury yield rises above 5.10% and real interest rates remain high, the possibility of a 3-month adjustment increases. Next week, we will confirm whether price, interest rates, COT, and sentiment align in the same direction.
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