- Gold continues to lose ground for the fifth day in a row and falls to a multi-week low.
- Gloomy expectations from the Fed, rising US bond yields and sustained dollar buying are putting pressure on.
- Recession fears and risk aversion momentum fail to impress bulls or lend any support to the metal.
The Prayed it extends this week’s downtrend for the fifth day in a row and drops to a three-week low on Friday. XAU/USD remains depressed during the start of the North American session and is currently hovering near the $1,750 level, down nearly 0.40% on the day.
Concerns about a global economic slowdown triggered a new wave of risk aversion on the last day of the week. This is evidenced by the generally weaker tone of equity markets, which turns out to be a key factor offering some support to the safe haven precious metal. That said, the continuation of the recent rally in the US dollar is keeping the attempted intraday rally in dollar-denominated gold at bay.
Indeed, the dollar index (DXY), which tracks the greenback against a basket of currencies, soared to a one-month high amid Fed expectations. FOMC Minutes released on Wednesday indicated that those responsible for monetary policy remain committed to raising interest rates to curb inflation. Furthermore, recent comments from several Federal Reserve officials suggest that the US central bank will maintain its tightening policy.
In addition, better-than-expected US macroeconomic data buoyed markets, which, in turn, caused US Treasury yields to rise further. Indeed, the benchmark 10-year US government bond yield is once again approaching the 3.0% threshold. This, in turn, continues to support the USD and helps deter flows of the underperforming yellow metal, favoring bearish traders.
Even from a technical perspective, the recent repeated failures near the $1,800 mark and subsequent drop below the previous monthly low around the $1,754 area add credence to the negative outlook. This, in turn, suggests that the path of least resistance for gold is to the downside. However, the metal remains on track to post heavy weekly losses and snap a four-week winning streak to break above one-month highs.
Technical levels to watch
Source: Fx Street
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