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Gold Price Forecast: XAUUSD flirts with daily low amid rising US bond yields, stronger USD

  • A combination of factors prompted fresh selling around gold on Monday.
  • Aggressive Fed rate hike bets, elevated US bond yields acted as a headwind.
  • Sustained USD buying exerted additional downward pressure on the metal.
  • The risk-off environment could help limit losses for the safe-haven XAUUSD.

Gold continued with its struggle to find acceptance above the very important 200-day SMA and met with a fresh supply on the first day of a new week. The XAUUSD remained depressed through the early European session and dropped to a fresh daily low, just below the $1,870 level in the last hour amid the prospects for a more aggressive policy tightening by the Fed.

Fed Chair Jerome Powell said last week that a 75 bps rate hike is not under active consideration. The markets, however, seem convinced that the US central bank would need to take a more drastic action to curb soaring inflation and are still pricing in a further 200 bps rate hike for the rest of 2022. This remained supportive of elevated US Treasury bond yields, which, in turn, undermined the non-yielding gold.

In fact, the yield on the benchmark 10-year US government bond climbed to its highest level in more than a decade and assisted the US dollar to stand tall near a two-decade high. This was seen as another factor that weighed on the dollar-denominated gold. That said, the prevalent risk-off environment could lend some support to the safe-haven precious metal and help limit any further losses, at least for the time being.

Firming expectations for rapid interest rate hikes in the US, along with strict COVID-19 lockdowns in China, have raised concerns about slowing global growth and a possible recession. This, in turn, tempered investors' appetite for riskier assets, which was evident from a generally weaker tone around the equity markets. The anti-risk flow warrants caution for bearish traders and before positioning for any further decline.

There isn't any major market-moving economic data due for release from the US, leaving the XAUUSD at the mercy of the USD price dynamics/US bond yields. Apart from this, traders will take cues from the broader market risk sentiment to grab short-term opportunities. The focus, however, would remain on the latest US consumer inflation figures on Wednesday. This would help determine the near-term trajectory for gold.

Technical levels to watch

XAU/USD

Overview
Today last price1871.58
Today Daily Change-12.40
Today Daily Change %-0.66
Today daily open1883.98
 
Trends
Daily SMA201922.15
Daily SMA501935.38
Daily SMA1001881.69
Daily SMA2001835.4
 
Levels
Previous Daily High1892.59
Previous Daily Low1866.18
Previous Weekly High1909.83
Previous Weekly Low1850.44
Previous Monthly High1998.43
Previous Monthly Low1872.24
Daily Fibonacci 38.2%1882.5
Daily Fibonacci 61.8%1876.27
Daily Pivot Point S11869.24
Daily Pivot Point S21854.51
Daily Pivot Point S31842.83
Daily Pivot Point R11895.65
Daily Pivot Point R21907.33
Daily Pivot Point R31922.06

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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