- Gold reverses an intraday decline to its lowest level since April 2020 amid modest dollar pullback.
- Recession fears and a softer risk tone give the yellow safe-haven metal some support.
- Expectations for more aggressive Fed rate hikes limit USD decline and precious metal gains.
The gold recovers from its lowest level since April 2020, reached earlier this Monday, and reaches a new daily high during the European session. The bulls, however, find it difficult to take advantage of the move beyond the level of $1,650 and remain at the mercy of the price dynamics of the dollar.
In fact, The dollar index, which measures the evolution of the greenback against a basket of currencies, gives up its initial gains after reaching a new maximum of two decades amid a rally in European currencies. This, in turn, helps dollar-denominated gold attract some buyers near the $1,626 zone. Aside from this, the cautious mood prevailing in the markets, amid concerns of a deeper global economic downturn, turns out to be another factor offering support to the safe-haven precious metal.
Nevertheless, recovery attempt lacks continuation, which warrants caution before positioning for a significant rise. In the past week, the Fed carried out a new interest rate hike and signaled that it will probably carry out more aggressive hikes in its next meetings to control inflation. The more aggressive stance taken by the US central bank remains supportive of elevated US Treasury yields and should limit any significant corrective slide in the dollar, at least for now.
The rate-sensitive 2-year US government bond yield remains near its highest level in 15 years, and the 10-year Treasury bond hits its highest level in 11 years. This could further help cap gold out of yields. In the absence of relevant economic data from the US, traders will be guided by the speeches of the influential members of the FOMC. This coupled with US bond yields, dollar price dynamics and broader risk sentiment could provide some lift to gold.
gold technical levels
Source: Fx Street
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