Gold continues to rise towards $1,820 as US yields decline.

The price of gold continued to rise and reached $1,825 on Thursday afternoon. The benchmark yield on the benchmark 10-year US Treasury note shifted lower following the US data that revealed a sharp rise in weekly unemployment claims, which helped the XAU/USD pair gain momentum.

Technical Overview

Technically speaking, before making new bets, bearish traders must wait for a sustained break below the $1,800 round number, which also happens to represent the 100-day Simple Moving Average (SMA). The price of gold may then start to decline more quickly and test the next important support area near the $1,775 horizontal zone before eventually falling to the $1,740-$1,738 area.

On the other hand, any following move above the swing high from the previous night, around the $1,824 region, may draw additional selling close to the $1,835 horizontal zone. A persistent increase over the latter might start a short-covering rally and push the price of gold up to the monthly peak, which is in the $1,858 range. The 50-day SMA barrier, which is now close to $1,869, comes next and should, at least temporarily, prevent any additional increases.

Fundamental Overview

The price of gold rises a little on Thursday, but there is no sustained buying, and it stayed firmly within the wider trading range from the previous day. Now trading just around $1,815, the XAU/USD is susceptible to continuing its downward trend that has been seen since early February.

Weaker US Dollar, recession fears lend support to the gold price

The US Dollar (USD) bulls opt to take some profits off the table following the recent strong bullish run to over a three-month top. This, in turn, is seen as a key factor lending some support to the US Dollar-denominated gold price. Apart from this, a generally softer risk tone – amid looming recession risks – benefits traditional safe-haven assets and acts as a tailwind for the XAU/USD. The upside, however, remains capped amid the prospects for more aggressive policy tightening by the Federal Reserve (Fed).

Hawkish Federal Reserve expectations cap gains for gold price

In fact, the markets are now pricing a greater chance of a 50 basis points (bps) lift-off at the next Federal Open Market Committee (FOMC) meeting on March 21-22. The bets were reaffirmed by hawkish comments by Fed Chair Jerome Powell on Wednesday, reiterating that interest rates would have to go higher and possibly faster to tame stubbornly high inflation. This remains supportive of elevated US Treasury bond yields and keeps a lid on any meaningful gains for the non-yielding gold price.

The focus remains on Friday’s jobs data from the United States

Hawkish Fed expectations, meanwhile, should help limit the downside for the USD, which, in turn, warrants some caution before placing bullish bets around the XAU/USD. Traders might also prefer to move to the sidelines and await the release of the closely watched monthly jobs data from the United States (US) – popularly known as NFP – on Friday. Hence, strong follow-through buying is needed to confirm that the gold price has formed a bottom near the $1,800 mark and positioning for a further appreciating move.

Thursday’s US macro data could provide some impetus

Market participants now look to the US economic docket, featuring the release of Challenger Job Cuts and the usual Weekly Initial Jobless Claims data later during the early North American session. This, along with the US bond yields, should influence the USD price dynamics. Apart from this, the broader risk sentiment could provide some impetus to the gold prices. The fundamental backdrop, however, favors bearish traders and suggests that the path of least resistance for the XAU/USD is to the downside.