Gold Price Forecast: XAU/USD attempts a bounce amid falling yields, will it last?


  • Gold price benefits from the sell-off in the US Treasury yields, risk-off mood.
  • Flattening of the yield curve amid Fed’s hawkishness keeps USD buoyed.
  • Gold’s recovery losing momentum below the falling wedge resistance.

Gold price (XAU/USD) extended its six-day losing streak on Friday and reached the lowest levels in two months at $1761, recording a 6% loss on a weekly basis. Gold bulls faced rejection below the $1800 mark in the first half of the day, resuming the downtrend. The Fed’s hawkish turn smashed gold while lifting the US dollar to two-month highs across the board. Hopes for sooner-than-expected Fed rate hikes dented gold’s appeal, as it considered a non-interest-bearing investment asset. However, weaker US Treasury yields helped gold price stage a modest recovery heading into the weekly closing. Meanwhile, investors digested the conflicting comments from the Fed policymakers.

Minneapolis Fed President Neel Kashkari said he wants to keep the benchmark short-term interest rate near zero at least through the end of 2023. On the other hand, St. Louis Fed President James Bullard said that he sees a Fed lift-off in late 2022 while adding that the central bank has begun discussing tapering asset purchases.

The bearish trend in gold price is seen reversing starting out a fresh week on Monday, as it draws support from the falling Treasury yields across the curve. The Fed’s hawkishness has poured cold water over the reflation trades, negatively impact the global stocks and yields. The benchmark 30-year Treasury yields have fallen below the key 2% level, four-month lows, suggesting flattening of the yield curve and receding reflation bets. However, the US dollar continues to hold higher ground, which could likely limit the recovery in the gold price. Additionally, gold bulls could turn cautious ahead of a slew of speeches lined up from the Fed policymakers. Tuesday’s Fed Chair Jerome Powell’s testimony will be also closely followed.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

Gold’s four-hour chart shows that the price is pausing its recovery momentum just below the falling trendline resistance at $1778.

Note that gold price is trending within a falling wedge formation on the said time frame, with a break above the latter likely to validate the bullish reversal pattern.

The next target for the bulls will then be seen at the bearish 21-Simple Moving Average (SMA) at $1801.

The further upside will then open up towards the June 17 highs of $1825.

The Relative Strength Index (RSI) has rebounded from the oversold territory, suggesting that there is extra scope for a rebound in prices.  

On the flip side, a retest of the monthly lows could be on the cards if gold price faces rejection at the wedge resistance.

Further south, the falling trendline support at $1755 will be the line in the sand for the bullish traders.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD drops below 1.1300 for the first time in two weeks

EUR/USD remains under bearish pressure in the American session on Monday and trades at its lowest level in two weeks slightly below 1.1300. US Markit Manufacturing and Services PMIs missed market expectations by a wide margin in early January. The S&P 500 Index is down nearly 2% after the opening bell.

EUR/USD News

GBP/USD extends daily slide toward 1.3450

GBP/USD continues to stretch lower toward mid-1.3400s on Monday as the mood continues to sour. Wall Street's main indexes are down between 1.7% and 2.1% after the disappointing PMI data from the US.

GBP/USD News

Gold declines toward $1,830 despite falling US bond yields

Gold climbed above $1,840 during the European trading hours but erased its daily gains to turn flat on the day at around $1,830. The benchmark 10-year US T-bond yield is down more than 2% on Monday as safe-haven flows continue to dominate the financial markets. 

Gold News

Crypto carnage continues to unfold

Bitcoin price has witnessed a massive crash over the past week, undoing the gains seen since July 25. Ethereum, Ripple and other altcoins have followed suit, experiencing an even worse crash. 

Read more

Nvidia extends losses after Bitcoin’s overnight flash crash

NVDA investors are getting used to seeing the colour red after a year in 2021 when all they saw was green. On Friday, shares of NVDA fell by 3.21% and closed the final trading day of the week at $223.74.

Read more

Majors

Cryptocurrencies

Signatures