- Sliding US bond yields undermined the USD and assisted gold to gain traction on Wednesday.
- Concerns about softening global growth extended additional support to the safe-haven metal.
- Aggressive Fed rate hike bets could keep a lid on any further gains ahead of the US CPI report.
Gold staged a goodish bounce from a three-month low, around the $1,832 area set earlier this Wednesday and for now, seems to have snapped a two-day losing streak. The XAUUSD climbed to a fresh daily top during the early European session and was last seen trading around the $1,850 level, up nearly 0.50% for the day.
The ongoing retracement slide in the US Treasury bond yields kept the US dollar bulls on the defensive, which, in turn, was seen as a key factor that offered support to the dollar-denominated gold. Apart from this, concerns about softening global growth further underpinned the safe-haven precious metal amid tight global supply chains resulting from China's zero-covid policy and the war in Ukraine.
That said, a combination of factors held back bulls from placing aggressive bets and kept a lid on any further gains for the commodity. A generally positive tone around equity markets, along with the prospects for a more aggressive policy tightening by the Fed, held back traders from placing bulls bets around the non-yielding gold.
The markets seem convinced that the Fed would need to take more drastic action to bring inflation under control and have been pricing in a further 200 bps rate hike for the rest of 2022. This should help limit the USD losses and further contribute to keeping a lid on any runaway rally for gold prices. Investors might also be reluctant to place aggressive bets ahead of the latest US consumer inflation figures, due for release later during the early North American session.
The US CPI report could influence the Fed's tightening path, which, in turn, would influence the USD price dynamics and provide a fresh directional impetus to gold. Hence, it will be prudent to wait for strong follow-through buying before confirming that the XAUUSD has formed a near-term bottom and positioning for any further appreciating move.
Technical levels to watch
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