Gold Price Forecast: XAU/USD retreats below $1,780 even as US yield curve flattens

Update: Gold (XAU/USD) trims intraday gains, taking a U-turn from the day’s high near $1,777 to recently around $1,773.50, up 0.53% on a day, heading into Monday’s European session. Even so, the gold buyers cheer downbeat US Treasury yields to keep the corrective pullback from late-April lows.

While increasing odds of the US Federal Reserve’s (Fed) monetary policy adjustments seem to weigh on the US Treasury yields, the recent consolidation in the gold prices could be traced to the US dollar’s strength ahead of the key European session.

It’s worth noting that today’s speech from New York Fed President John C. Williams will be the key for gold traders after St. Louis Fed President reiterated his bullish bias.

Read: US Treasury yields drop to early 2021 levels during three-day downtrend


Previous udpates...

Update: Gold price has turned positive for the first time in one week, having found some support just above $1760. The ongoing decline in the US Treasury yield across the curve is saving the day for the gold bulls. Falling inflation expectations and uncertainty over the US infrastructure spending plans is weighing heavily on the returns on the markets, as investors re-think the Fed’s hawkish stance. Last week, gold dropped 6% after Fed signaled sooner-than-expected rate hikes, which killed the demand for the yieldless gold. Gold price hit the lowest in two months last Friday at $1760. At the time of writing, gold is trading at $1774, up 0.55% on the day.

Read: Chart of the Week: Gold bulls stepping in at critical support


A stronger USD following the Federal Reserve hawkish tone kept the commodities complex down and weighed n precious metals. 

Gold experienced heavy selling, with the precious metal closing below $1,800/oz and ending down by 0.52% at $1,764.23 ranging between a low of $1,761.04 and $1,797.31.

The US dollar extended its advance against a basket of currencies in a classic short squeeze as it built on gains logged after the US Federal Reserve surprised markets earlier in the week with a hawkish hold.

The dollar index DXY, which tracks the greenback against six major currencies, was printing its highest levels since mid-April at 92.4050 which put the index on pace for its best weekly jump in about 14 months.

Risk appetite is lower and US stocks are under pressure as the Fed has signalled that it will raise interest rates and end emergency bond-buying sooner than expected.

''Considering that gold was set-up for a pullback like a speed bump on the racetrack, with speculative and physical flows slowing, the ongoing pullback likely has more room to run.,'' analysts at TD Securities explained.

''CTAs can add to their shorts below $1730/oz, which suggests some potential for sustained downside momentum.''

Meanwhile, the screw was turned on Friday when St. Louis Federal Reserve President James Bullard said that the US central bank's toward a faster tightening of monetary policy was a "natural" response to economic growth and particularly inflation moving quicker than expected.

In this regard, on a quieter week ahead in terms of data, the emphasis will be on the shorter end of the US yield curve which is dollar positive.

This may help to push gold below critical weekly support where the counter trendline meets that late April weekly prices, May highs and Nov lows in horizontal structure in the $1,760s. 

Gold technical analysis

The daily chart shows that the price is on the verge of a weekly bullish Head and Shoulders with the first upside target coming with a confluence of the prior lows and a 38.2% Fibonacci retracement level.


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 News

Latest Forex News

Editors’ Picks

EUR/USD clings to 1.18 ahead of all-important ECB meeting

EUR/USD is hovering around 1.18 as the clock ticks down to the ECB's first policy announcement after unveiling its more dovish strategic review. ECB President Lagarde is set to make changes to communications and perhaps to policy. Covid headlines are eyed.


GBP/USD jumps to 1.3750, dismissing Brexit, covid concerns

GBP/USD is trading around 1.3750, extending its rebound from five-month lows. Sterling has shrugged off a growing EU-UK row over the Northern Irish protocol and persistently high covid figures in the UK. The BOE's Broadbent sees no rush to respond to inflation. 


XAU/USD is not out of the woods yet, levels to watch

Gold price is off the lows but remains under pressure amid a better market mood and rising Treasury yields, making the non-yielding gold less attractive.

Gold News

Bitcoin breathes life into altcoins

Bitcoin price might pull back before it continues its uptrend. Ethereum price is facing a critical resistance level at $2,018 and might retrace before heading higher. Ripple price is bouncing off a demand zone ranging from $0.548 to $0.568.

Read more

Why is Tesla stock moving

Tesla underperformed the broad market on Wednesday closing just under 1% lower at $655.29. Equity markets have been recovering from the hammering they took on Monday but Tesla did not get the memo and remained in a bearish mood.

Read more