Gold Dips on Robust Dollar and U.S. Treasury Yields

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Gold prices fell on Monday as the dollar climbed back close to a 20-year higher. The greenback rose as investors searched for safety. And the stronger dollar made the bullion more expensive for investors using rival currencies.

Another factor that weighed on the yellow metal was higher U.S. government bond yields. The benchmark 10-year Treasury note yields jumped to their highest level since November 2018. It was mainly due to the growing concerns over rising interest rates and slowing economic growth. The higher yields dented the demand for the zero-yield metal.

Spot gold is currently trading at $1,869.90 per ounce as of 0830 GMT.

Meanwhile, St. Louis Federal Reserve Bank President James Bullard and Fed Governor Christopher Waller argued that the central bank did not “miss the boat” in the fight against inflation. They are two of the Fed’s most outspoken policy hawks. They said the Fed began tightening monetary policy even before raising interest rates in March.

The central bank raised its policy rate by 0.75-1.0% this week. But Bullard called for a 3.6% rate hike to bring inflation under control since it has already gone too high.

OANDA senior analyst Jeffrey Halley commented that gold could retest the support level at $1,850 and then $1.835 if the dollar index rose to 104.00. And if the greenback continues to go up this week, the bullion could slide back down to $1,800.

ANZ Research analysts agreed that there are several headwinds for gold prices. These include quicker quantitative easing, the Fed’s aggressive rate hikes and the easing of the Russia-Ukraine war. But they believe gold prices remain supported by heightened geopolitical risks, elevated inflation and concerns about a global economic slowdown.

On the technical front, FXStreet senior analyst Dhwani Mehta said gold prices have carved out a bear flag on the daily chart. It means the path of least resistance for bullion prices remains down. If gold continues to close below $1,868, it will confirm bearish continuation formation and open a new sell-off towards $1,850. If that happens, the next support will be down to $1,836. And if the bullion trades below that level, it might drop to $1,800.

Mehta also mentioned that the 14-day Relative Strength Index is falling below the midline. It indicates more room for further price decline. She also cited the latest CFTC data that showed the metal’s speculative net long dropped by 16,507 lots. It left speculators with a net long of 82,935 lots.