XAU / USD struggles to profit from dollar weakness and stuck at $ 1,825

• Gold is stuck at the $ 1,820 zone, having struggled to benefit from recent USD weakness.
• US nominal and real yields remain resilient near recent highs, limiting gold’s appeal for now.

Gold prices (XAU / USD) They have retreated from the Asian session highs / early European session highs at $ 1,828 in more recent trading, although for the most part it has remained above $ 1,820. Some traders have been disappointed by the difficulties of gold to profit from the weakness of the US dollar this week. The precious metal is up around 1.50% for the week, having recovered to current levels at $ 1,820 from below $ 1,800. But the rally has petered out before this year’s highs of $ 1,830. That compares with the dollar index, a trade-weighted basket of major dollar pairs, which tumbled to fresh two-month lows on Thursday below the 95.00 level. Typically, a weaker dollar benefits USD-denominated precious metals, such as gold, by making it cheaper for international buyers.

Gold’s reluctance to hit new multi-month highs coupled with the recent decline in the dollar is rooted in a few factors. First, the dollar movement does not reflect a fundamental bearish development of the USD, but rather appears to be driven by the positioning adjustment, as market participants post gains on long positions. In fact, recent fundamental developments in the USD, such as indications from the Federal Reserve that it wants to implement up to four increases in 2022 and begin quantitative adjustment, headline inflation hits new nearly four-decade highs at 7.0% and the unemployment rate falls below 4.0%, all are possibly positive for the USD. These bucks to the dollar keep, at a minimum, supported US bond yields near recent highs; 10-year yields are trading at 1.75%, just below recent multi-year highs of 1.80% and 10-year TIPS (real) yields are back in the -0.75% area, just below highs. multi-month at -0.70%

In fact, the resilience of bond yields to hold near recent highs despite the US dollar pullback is the second main reason for XAU / USD reluctance to move above $ 1,830. The latest mixed jobless claims, US producer price inflation data and comments from Fed member Patrick Harker, who supports three increases and could be persuaded from four in 2022, did not change the sentiment of the XAU. / USD. However, traders will be on the lookout for the Fed’s upcoming speech on Thursday in the form of a Senate hearing by Fed Vice President candidate Lael Brainard starting at 15:00 GMT, as well as comments from other members.

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