- Gold rebounds slightly from three-month lows hit earlier this Friday.
- USD pulls back from two-decade highs and offers some support to XAU/USD.
- Risk appetite, a rebound in US bond yields and expectations of Fed rate hikes limit the yellow metal’s gains.
The price of Gold (XAU/USD) has reversed an intraday decline to the $1,810 zone and has staged a modest recovery from the three-month low hit earlier this Friday. However, the intraday rise has not been continued and it has remained capped below the $1,830 level. XAU/USD appears to have stabilized in neutral territory around the $1,822/$1,823 zone during the early part of the European session.
The US dollar moved lower on the last day of the week, as the bulls opted to take some profits after the recent rally to a 20-year high. This, in turn, was considered a key factor that offered some support to the price of gold, denominated in dollars. However, a combination of factors acted as a headwind for the precious metal and limited any significant rally, at least for the time being.
The rally in global equity markets reduced demand for traditional safe-haven assets, which was bolstered by a strong rally in US Treasury yields. Aside from risk appetite, the prospects for a more aggressive tightening of monetary policy by the Federal Reserve they prevented investors from opening bullish positions on gold, which does not produce returns. This warrants some caution before confirming a short-term bottom.
Fed Chairman Jerome Powell also reaffirmed on Thursday that the central bank is willing to raise interest rates by 50 basis points at each of the next two meetings. Powell further promised that the Fed was prepared to do more to curb rising inflation.. The fundamental backdrop favors dollar bulls and suggests that the recent move lower in gold prices may still be far from over.
Even from a technical point of view, the yellow metal confirmed a new bearish break below the important 200-day SMA on Thursday. Therefore, any further move to the upside could be seen as a selling opportunity and risks fading quickly. Investors are now expecting the preliminary US Michigan Consumer Sentiment Index to give XAU/USD a further boost at the start of the North American session.
gold technical levels
Source: Fx Street
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