- Gold has rebounded from a nearly four-week low hit on Tuesday.
- Pullback in US bond yields triggers dollar profit-taking and benefits XAU/USD.
- Expectations of an aggressive rate hike from the Fed could cap the yellow metal’s gains.
The gold has attracted some buying near the $1,810 area and made a solid bounce from the low of almost four weeks that it reached this Tuesday. XAU/USD continues its intraday rise and rises to the $1,830 area during the early part of the European session, reversing some of the previous day’s sharp decline.
After the recent strong bull run, the US dollar witnessed some profit taking from a new two-decade high reached on Monday, amid retreat in US Treasury yields. This, in turn, was considered a key factor extended some support to the price of gold denominated in dollars, although a combination of factors could hold investors back from taking aggressively bullish positions. A change in global risk sentiment, as evidenced by the positive tone in equity markets, could act as a headwind for the safe-haven precious metal. Also, expectations of more aggressive Fed policy tightening could help limit gold gainsno performance.
US CPI consumer inflation figures released on Friday fueled speculation that the Federal Reserve would raise interest rates at a faster-than-expected pace to cool price pressures. In fact, the markets are assessing a tightening of 175 basis points in the next three meetings, which implies at least a rate hike of 75 basis points for September. Expectations on Monday lifted the yield on the two-year Treasury note, seen as a gauge of the Fed’s policy rate, to a new 15-year high and the benchmark 10-year US government bond to its level. highest since April 2011. Therefore, the focus of attention will remain on the outcome of the FOMC’s two-day monetary policy meeting, scheduled to be announced on Wednesday.
Nevertheless, the fundamental backdrop appears to be leaning strongly in favor of the bears and supports the prospects for further short-term losses. In turn, any further moves to the upside could still be seen as a selling opportunity and risk fading quite quickly. In the absence of major economic releases in the United States, US bond yields will continue to influence the dynamics of the dollar price. Aside from this, investors could follow signs of broader market risk sentiment to take advantage of short-term opportunities around gold.
gold technical levels
Source: Fx Street
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