• Gold spot slides for the second consecutive day and extends its weekly losses to 3.12%.
  • Higher US Treasury yields and real rates weigh on the appeal of the yellow metal.
  • Gold Price Forecast (XAUUSD): Remains downward pressured, and a break of $1800 to open the door for a challenge of the YTD Low at around $1780.

Gold spot (XAUUSD) grinds lower in the midday of the North American session, down by 0.27%, as the US Dollar continues printing fresh 20-year highs on Tuesday, weighing on the non-yielding metal appeal as US Treasury yields rise. At the time of writing, XAU/USD is trading at $1812.24 a troy ounce.

In the meantime, the US Dollar Index, a measure of the greenback’s value vs. a basket of peers, rises by 0.16%, sitting at 105.379, underpinned by the yields of US Treasuries. Reflection of the aforementioned is the 10-year benchmark note rate at 3.439%, up 6.8 bps.

Risk-aversion extends for the second consecutive day, as reflected by the bloodbath in global equities. On Monday, near the Wall Street close, reports emerged that the US Federal Reserve might hike 75 bps the Federal Funds Rates (FFR) on Wednesday as a response to last Friday’s hot US CPI of around 8.6%. Traders are braced for an upward move, as shown by the CME FedWatch tool, which sits at a 96.1% chance of a 0.75% rate increase.

Therefore, Gold prices are due for a further correction lower. Commerzbank analysts, in a note, wrote, “Gold is facing headwind from the persistently firm US dollar and, above all, from the further rapid rises in bond yields. Yields on two-year US Treasuries have surged by around 30 basis points. Yields on ten-year US Treasuries climbed for a time above 3.4%, their highest level in more than eleven years. As a result, real interest rates have also picked up significantly and at 0.68% now find themselves at their highest level in over three years.”

At the time of publishing, the US 10-year Treasury Inflation-Protected Securities (TIPS), which are also a proxy for real rates, sit at 0.803%, extending its gains, spurring a fall in Gold spot (XAUUSD) towards a daily ow at $1807.65

Before Wall Street opened, the Producer Price Index (PPI) for May, rose by 10.8% YoY, in line with expectations, and up 0.5% from April. The market players’ reaction was muted as investors focused on Wednesday’s Retail Sales in advance of the Federal Reserve Open Market Committee (FOMC) monetary policy decision.

Gold Price Forecast (XAUUSD): Technical outlook

On Monday, XAU/USD prices collapsed sharply below the 200-day moving average (DMA) and broke below a 4-year-old upslope support trendline that passed around July 15, 2021, high at $1834, a significant support/resistance level for gold traders, exacerbating the fall towards the $1820 area.

That said, the XAU/USD first support level would be the May 18 low at $1807.23. Break below would expose the $1800 psychological level, which, if it gives way, XAU/USD bears could prepare an attack towards the YTD low at $1780.18.

Key Technical Levels

XAU/USD

Overview
Today last price 1812.24
Today Daily Change -7.42
Today Daily Change % -0.41
Today daily open 1819.18
 
Trends
Daily SMA20 1847.17
Daily SMA50 1882.05
Daily SMA100 1890.04
Daily SMA200 1842.29
 
Levels
Previous Daily High 1879.26
Previous Daily Low 1818.56
Previous Weekly High 1876.01
Previous Weekly Low 1825.1
Previous Monthly High 1909.83
Previous Monthly Low 1786.94
Daily Fibonacci 38.2% 1841.75
Daily Fibonacci 61.8% 1856.07
Daily Pivot Point S1 1798.74
Daily Pivot Point S2 1778.3
Daily Pivot Point S3 1738.04
Daily Pivot Point R1 1859.44
Daily Pivot Point R2 1899.7
Daily Pivot Point R3 1920.14

 

 

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