As Treasury yields decline, gold holds its comeback gains below $2,000.
FUNDAMENTAL OVERVIEW
The sustained selling in US Treasury bond yields amid risk-off markets is aiding the gold price’s recovery below $2,000 now. The resumed increase in the value of the US Dollar, however, continues to limit the upside potential of the gold price.
Following a small reversal on Friday, US Dollar sellers made a strong comeback on Monday during a calm session, taking the negative cue from the falling US Treasury note yields as they crossed the curve. The benchmark US Treasury 10-year bond yields decreased by eight basis points (bps), the most since March. The US 10-year rates again crossed the 3.50% threshold.
Markets revised their forecasts for rate increases by the US Federal Reserve (Fed), which was expected to pause after raising rates by 25 basis points in May. To conclude the year below 4.50%, the US central bank is predicted to slash rates as early as July. Concerns about the ongoing US debt ceiling crisis also caused haven asset flows into US government bonds, which crashed US Treasury bond rates and the US Dollar.
“US President Joe Biden and House Speaker Kevin McCarthy are set to enter the next stage of the debt ceiling standoff, with a key vote and fresh Treasury data that could raise the urgency for a deal,” according to Bloomberg. The idea by House leader McCarthy to cut spending was criticized by Moody, which stated that it “would meaningfully increase the likelihood” of a recession.
Should the US Dollar see another step lower in the coming day along with the continuous decline in US Treasury bond yields, gold price could extend its rebound over the $2,000 mark. The fate of gold, however, depends on the US Conference Board Consumer Confidence data and a number of corporate earnings from US giants, including Pepsi, General Motors, General Electric, McDonald’s, Microsoft, UBS, and UPS. These earnings would be crucial in determining risk appetite and, in turn, the demand for the US Dollar.
GOLD TECHNICAL ANALYSIS DAILY CHART:
Technical Overview
- Gold is currently trading in the down channel.
- Gold is currently trading below 5&20 SMA.
- RSI is in buying zone which suggests bullishness and Stochastic is suggesting a downtrend.
- Gold resistance is at 1990.90 & its immediate support level is 1981.65
HOW TO TRADE GOLD
Gold was trading higher until it faced resistance, at that point a bearish engulfing was formed. The price then started moving lower low structure and is currently trading at an important support zone; if this zone is broken, further downside may be expected.
