• Gold moves higher on US dollar weakness following Powell's testimony.
  • Gold is trading between two levels of resistance & support, $1,810, or thereabout, on the downside and $1,875, or there about on the upside.

At $1,840, the price of gold is a little lower than the highs but still, the bulls are 0.4% higher on the day. The price has travelled between a low of $1,823.45 and a high of $1,847.93 so far. A threat in US Treasury yields and the US dollar has bolstered bullion's appeal amid growing recession concerns but it has started to give up early gains as investors move into US stocks and risk assets despite higher interest rates.

Bond yields fell ahead of testimony by Federal Reserve chair Jerome Powell to Congress and his delivery was taken as less hawkish. The softer yields are bullish for gold since the yellow metal offers no interest. The yield on the US 10-year note was last seen down 3.8% to 3.156%, falling from a high of 3.283% to a low of 3.124%. Meanwhile, US stock markets have reversed course from early losses and moved higher, with the Dow Jones up 0.6% and the S&P 500 index last seen up 0.75%. The NASDAQ is higher by 0.9%. The US dollar edged down 0.3% as measured by the DXY index, falling from a high of 104.95 to a low of 103.858.

Federal Reserve Chair Jerome Powell said the US central bank is "strongly committed" to bringing down inflation, but there was a sigh of relief that Powell was not any more hawkish than he was when the Fed raised its benchmark overnight interest rate by three-quarters of a percentage point, its biggest hike since 1994.

While Powell said that the Fed was strongly committed to returning inflation to its 2% objective, he did not state that this commitment is unconditional, as the Monetary Policy Report did last week. Additionally, during the Q&A he tried to convince the audience that a soft landing is possible, but that price stability is his priority right now. However, recession fears are mounting.

This is offering support to gold bugs looking for a peak in market pricing for Fed hikes, analysts at TD Securities noted. ''Markets are increasingly discounting a recession looming on the horizon, which historically has led a pivot in Fed policy. However, this hiking cycle differs from recent historical analogs as the Fed's ability to control inflation is limited, given that the supply-side is disrupted.''

''In turn, gold bugs sniffing out a potential stagflationary outcome associated with lower growth but lingering inflation should also consider that central banks, facing a credibility crisis, could also continue to raise rates for longer than they otherwise would. In this scenario, pricing for a Fed pivot would be less associated with recession odds than in prior episodes,'' the analysts explained further.

''In the immediate term, CTA trend followers are also supporting the yellow metal, after Chair Powell tactfully manufactured a sell-the-news rally in gold following a 75bp hike, which has manifested as a whipsaw for CTA trend followers.''

Gold technical analysis

The above illustration of the 4-hour time frame pinpoints the areas of liquidity in the order blocks (OBs), or the expected levels of demand and supply, and the areas where the price is yet to mitigate the price inefficiencies (PI), or 'price imbalances' (a miss-match in bids and offers). This leaves the price trapped between $1,810, or thereabout, on the downside and $1,875, or there about on the upside.

The nearest demand area, or order block, is located at around $1,826. There is a price imbalance between there and the current spot price that could be mitigated in the near term, drawing the market towards the demand zone. If the bulls commit, then there will be a case for a move higher towards areas of imbalance above on the way towards $1,875. 

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 Join Telegram

Recommended content


Recommended content

Editors’ Picks

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD has lost its bullish momentum after having climbed above 1.0570 with the initial reaction to the US data in the American session and retreated toward the mid-1.0500s. On a weekly basis, the pair remains on track to close in positive territory. 

EUR/USD News

GBP/USD struggles to hold above 1.2300

GBP/USD struggles to hold above 1.2300

GBP/USD has edged lower following a jump above 1.2300 in the early American session on Friday. The market mood remains upbeat ahead of the weekend with Wall Street's main indexes posting strong daily gains on upbeat US data. 

GBP/USD News

Gold stays below $1,830 as US yields edge higher

Gold stays below $1,830 as US yields edge higher

Gold continues to fluctuate below $1,830 on Friday and looks to close the second straight week in negative territory. Fueled by the risk-positive market environment, the benchmark 10-year US Treasury bond yield is up more than 1% on the day, limiting XAU/USD's upside.

Gold News

Why Cardano could surprise over the weekend

Why Cardano could surprise over the weekend

ADA  set to close out the week with a gain on the workday trading week and over the weekend? Central banks signaled that the rate hike cycle is ending, meaning less stress and tight conditions for trading, opening up room for some upside potential with Cardano set to pop above $0.55 and test a significant cap.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Forex MAJORS

Cryptocurrencies

Signatures