Gold Prices Rise on Falling U.S. Treasury Yields and Geopolitical Risk Ahead of FOMC

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Spot gold has been on the climbing this week after markets proceed with the view {that a} hawkish Fed is priced in leaving the U.S. greenback disappointing from earlier expectations. Investors have been wanting elsewhere for alternatives which have stored the greenback muted regardless of U.S. 10-year Treasury yields hitting ranges final seen in early 2020. The outlook stays bullish for the dollar however the post-FOMC convention subsequent week ought to shed extra mild on the stability sheet run-off strategy.


Source: Refinitiv

Short-term, Russia-Ukraine pressures may have a major affect on the commodity market ought to sanctions be imposed on Russia driving greater pure gasoline and wheat costs specifically. Global inflation is already working scorching with China’s zero tolerance strategy to COVID-19 and rising oil costs including gasoline to the hearth. An further layer of infliction from Russia/Ukraine, would give gold a constructive outlook by way of its tenuous “inflation-hedge” designation.

A extra longer-term view (yearly forecast) favors a decline in gold costs with greater rates of interest, rising actual yields, fading inflation and a stronger U.S. greenback.



XAUUSD daily chart

Chart ready by Warren Venketas, IG

The medium-term symmetrical triangle constricting gold value motion since mid-2021 is converging pointing to an impending breakout. The eventual break above 1830.00 earlier this week noticed costs attain nearly 1850.00 earlier than settling round 1840.00.

A rising channel construction (blue) can also be evident since late 2021 which resembles a bear flag sample. A bear flag is historically indicative of a bearish continuation ought to costs break under flag assist. With fundamentals supporting a weaker greenback long-term, that is undoubtedly a sample to keep watch over.

From a bullish standpoint, there’s nonetheless room to run as much as triangle resistance (black) and will coincide with an overbought Relative Strength Index (RSI). Fundamentals are closely influential at this present juncture however directional bias must be evident post-FOMC.

Resistance ranges:

Support ranges:


IGCS exhibits retail merchants are presently distinctly lengthy on gold, with 70% of merchants presently holding lengthy positions (as of this writing). At DailyFX we sometimes take a contrarian view to crowd sentiment and the very fact merchants are net-long is suggestive of a short-term bearish inclination.

Contact and comply with Warren on Twitter: @WVenketas

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