- Gold prices have been oscillating on Thursday and are currently hovering around $ 1,790, a drop of more than 1.0% on the day.
- Real yields have risen following aggressive Fed Minutes on Wednesday and this is weighing on precious metals.
Trading conditions in the precious metals markets have been choppy in recent trading, although bearish momentum in the wake of Wednesday’s aggressive Fed Minutes appears to be gaining ground for now. Gold prices (XAU / USD) They have fallen from Asian session levels in the $ 1,810 zone to current levels (and session lows) around $ 1,790, with losses on the day currently standing at just over 1.0%. A rally in the European session that saw gold bounce from $ 1,795 to close to $ 1,810 finally demonstrated nothing more than an intraday rebound and a good opportunity for gold bears to join short positions.
On its way down to test the $ 1,790 zone, the XAU / USD has fallen through a succession of key moving averages (the 21, 50 and 200 DMAs that lie between $ 1,797 and $ 1,805). But the bears so far have not been able to decisively send gold prices below support in the form of recent lows, including last week’s low of $ 1,789.50 and the prior week’s low of $ 1,785. If these lows disappear, bearish technicals will likely be aiming for a quick test of the December lows below $ 1,760.
The selling pressure in the gold markets has come as no surprise to many analysts who looked at real US returns, with which gold tends to be strongly negatively correlated, increasing in the wake of the Fed Minutes of the Wednesday. Short-term interest rate markets have been very busy betting on when the Fed’s rate hike cycle will begin and how high the bank will eventually raise rates. But with markets also increasingly buying into the Fed’s optimistic economic outlook, this additional dose of Fed aggressiveness has not been depressing long-term growth and inflation expectations. The net result is an increase in real yields and the remarkable 10-year TIPS yield rose to its highest level in more than six months on Thursday above -0.80%. When the 10-year TIPS yield was near the 0.80% level in September, the XAU / USD is trading below $ 1,750.
For gold’s losses to really accelerate, the US dollar will likely need to rebound a bit more from current levels. The DXY remains locked within the 95.50-96.90 range that has prevailed now for several weeks, despite the recent spike in yields and the decline in stocks in the wake of Fed Minutes. If the dollar starts to rise (such as Perhaps Friday’s US jobs report could be a catalyst), that, combined with higher real returns, could pose a big downside risk for gold.
Additional technical levels
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