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Gold prices influenced by higher real yields, strong US dollar, and bearish breakout expectation -by Ecork

Gold price outlook:

  • Gold prices regained a full correction after geopolitical turmoil caused gains from the first quarter
  • Rising real yields and strong momentum in the US dollar were major bearish catalysts for precious metals
  • This article examines the key technical levels that XAU/USD should watch in the near term

Most Read: US dollar, gold, S&P 500 – how the markets reacted to the US CPI

The Russian invasion of Ukraine triggered a spike in gold prices during the first quarter, pushing the metal higher Close All-time high near $2,075 an ounce. However, the geopolitical premium seems to have faded, even though the war in Eastern Europe is far from over and is still going on nearly three months after its outbreak.

By examining the daily chart, we can see that the XAU/USD pair fully recovered its gains stemming from the geopolitical turmoil, retreating 11% from its March high to trade just above $1,835, a confluence support area, where the average converges. The 200-day simple moving average. With The lower end of the medium-term ascending channel.

The recent decline in the commodity has been driven, among other things, by the strong momentum of the US dollar and, most importantly, the rise in interest rates. For context, the DXY, a measure of the dollar’s strength, has It’s up more than 6% since AprilWhile the 10-year real yield (TIPS) turned positive for the first time in more than two years, rising from -0.53% to 0.20%, the highest level since November 2019.

US 10-Year Real Productivity Scheme

Source: CNBC

Although gold is considered a safe asset, it has not lived up to that reputation recently. In fact, in recent weeks, gold tracing has been strange Losses in stock spaceinstead of violating the trend of risky assets, a sign of that fact rate dynamics Much more important for precious metals than investor sentiment. With real yields expected to continue rising on hawkish Fed policy, XAU/USD could face more headwinds in the near term, especially if the recession story begins to unravel and traders abandon defensive positions.

In terms of technical analysis, XAU/USD is dancing around a major support near $1,835/$1,830, as we mentioned Previously. If the bears could do it to cut The price is decisively lower than this floor, the sale benefit can gain momentum, paving the way To retest the 2022 low of $1,780. With more weakness, attention turns to the December 2021 swing low at $1,753.

On the flip side, if the buyers regain the upper hand and spark an upward wave in the price action, the initial resistance extends from $1,870 to $1,875. If this barrier is removed, we cannot rule out a move towards $1,910, followed by $1,960, although the bullish argument is somewhat weak at this point.

gold price technical chart

gold price chart

Gold price chart was created using TradingView

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— By Diego Coleman, Market Strategist, DailyFX

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