- Gold struggled to gain significant traction and remained confined to a range below the 200-day SMA.
- Broad dollar weakness offered support to the metal and helped limit any significant decline.
- Boosting risk appetite, rising US bond yields continued to act as a headwind and capped the upside.
Gold reversed an intraday drop to the $1,830 area, or a three-day low, but struggled to capitalize on the rally attempt and held below the important 200-day SMA. The XAU/USDwhich has oscillated between tepid gains and small losses, appears to have stabilized in neutral territory and has been seen trading below the $1,840 level during the early American session.
Indications that there will be no consensus for a 100 basis point Fed rate hike in the near future sparked further selling around the US dollar on Tuesday. This, in turn, was seen as a key factor that extended some support to dollar-denominated commodities. However, a combination of factors prevented traders from placing aggressively bullish bets on gold.
Risk momentum, represented by the strong rally in global stock markets, prevented the safe haven XAU/USD from rising significantly. On the other hand, expectations that the Federal Reserve will maintain its aggressive monetary policy tightening pushed up US Treasury yields. This acted as a headwind for the non-yielding gold.
The two-way, no-directional price movement seen since Monday points to traders’ indecision about the next leg of a directional move for XAU/USD. That said, the recent breakout of a multi-week trading range and acceptance below a technically significant moving average (200 DMA) favors bearish traders and supports prospects for further losses.
Therefore, any significant rally could be seen as a selling opportunity and is at risk of falling apart quickly. However, traders may refrain from making aggressive bets ahead of Fed Chairman Jerome Powell’s testimony on Wednesday and Thursday. Meanwhile, broader risk sentiment, US bond yields and dollar price dynamics could give gold some lift.
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
