Gold Price Analysis: XAU/USD slides to $1735 area as US bond yields hit new cycle highs

• Gold failed to preserve its early gains and failed ahead of the $1760 strong horizontal resistance.
• Elevated US bond yields prompted short-covering around the USD and exerted some pressure.
• A pullback in the equity markets helped limit any further losses for the safe-haven commodity.

Gold witnessed some selling during the early European session and refreshed daily lows, around the $1735 region in the last hour.

The precious metal struggled to capitalize on its early positive move back closer to monthly tops and once again started retreating from the vicinity of the $1760 support-turned-resistance. The early uptick was exclusively sponsored by the post-FOMC US dollar selling, which tends to benefit the dollar-denominated commodity. The Fed on Wednesday downplayed market expectations and indicated that it was in no rush to raise interest rates at least through 2023.

The Fed, however, upgraded its economic projections and predicted a V-shaped recovery in the US. The central bank now sees the economy growing by 6.5% this year as against the 4.3% rise estimated in December. Adding to this, inflation is expected to exceed the Fed's 2% target and rise 2.4% this year. This, in turn, pushed yields on long-end US government bonds to new cycle highs, which prompted some USD short-covering and weighed on the non-yielding yellow metal.

Meanwhile, another sell-off in the US fixed income market raised fears about distressed selling in other asset classes. This was evident from a pullback in the US equity futures, which extended some support to the safe-haven XAU/USD and helped limit further losses, at least for now. That said, the emergence of some fresh selling ahead of a key pivotal point suggests that the recent bounce from multi-month lows might have run out of steam. A subsequent slide below the $1730 will reaffirm the negative outlook and turn the commodity vulnerable.

Technical levels to watch