- The pair (XAU / USD) is struggling to make use of risk-off market conditions on Monday and remains below $ 1,800.
- A daily increase in real returns is the main reason gold is struggling.
Despite a broadly risk-averse market tone and an underperforming US dollar, gold prices (XAU / USD) are struggling to advance on Monday. Prices are currently lateralized in the session, but have retreated from the highs of the previous session in the zone of $ 1,805 to the current levels around $ 1,797 in the recent trade. The 50-day moving average at $ 1,795 provided support early in the session, but if it turns down from that level, the XAU / USD is likely to pull back to test the early / mid-December highs and the 200 DMA in the zone. of $ 1,790.
Gold’s lackluster performance on Monday is due to the fact that real returns in the US have advanced. Yields on the 10-year TIPS, to which gold is very sensitive, rose about 2bp on the day and returned above the -1.0% level. But that still leaves the 10-year TIPS yield within the recent late-November / December ranges of around -1.1% to -0.9%. The 5-year TIPS yields are up about 4 basis points, but are also within the ranges of the past few weeks. Whether the most recent rally in real yields can turn into a broader move up is the key question, which of course would be detrimental for gold. As real returns increase, so does the opportunity cost of having non-performing gold.
The recent aggressive shift at the Fed has some strategists betting on a higher move in real yields. Recall that last week the Fed doubled the pace of its QE reduction, which according to Fed member Christopher Waller indicated that the March meeting was active for a rate hike, and recall that the bank targeted three rate hikes in 2022. Longer-term nominal yields have remained subdued in recent weeks despite this radical turnaround amid concerns about the longer-term growth prospects. It only takes inflation expectations to fall faster than long-term growth expectations for this to cause real yields to rise (something an aggressive Fed could unleash). Therefore, gold traders should be aware that market conditions could turn increasingly bearish for the precious metal in 2022.
Additional technical levels
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