Gold daily Sept 26
Gold daily

There is a 'sell everything' flavour in markets today, with oil as a rare exception. The problem for markets is that Fed dove Neel Kashkari today said there was a 40% chance that the Fed hiking cycle won't be over this year and the possibility that rates would have to go 'significantly' higher to restrain consumers and bring inflation back to target.

In the safe haven space, gold is facing major competition from bonds. US 2s sold for above 5% at auction today and 10-year notes yield 4.56%. Gold continues to yield zero and a widening of that spread -- especially in a risk-averse scenario -- is a losing hand.

To be sure, there are some tailwinds for gold. BRICS and countries unfriendly to the US appear to be buying gold and the weakness in the yuan is making gold attractive in China. That's helped to keep gold at relatively high levels this year and it remains near record highs against a number of currencies.

Against the US dollar though, the latest leg lower marks a fourth lower high, underscoring the downtrend. A fall below $1900 would be a one-month low but the real level to watch is $1884. If that gives way, there isn't much support until the low $1800s.

I like gold for when the Fed turns but the timing of that isn't clear at the moment. Seasonally, gold also tends to rally starting in November so patience is the better play for now.

Ultimately, there is a demand for safe havens with $16 billion pouring into the TLT long-term bond ETF this year. At some point there will be falling rates and it will work its way into gold but we're not there yet.