Gold Slips on Stronger Dollar and Treasury Yields Ahead of Powell’s Congressional Testimony

Gold bars

On Wednesday, gold prices fell for the fourth consecutive session as the U.S. dollar strengthened and Treasury yields firmed. The greenback bounced back to a nearly two-decade high and dampened the bullion’s appeal to holders of rival currencies. Meanwhile, higher yields raised the opportunity cost of owning the zero-interest metal. However, gold still trades in a narrow range as market participants wait for cues from Federal Reserve Chief Jerome Powell’s congressional testimony.

Spot gold is currently trading at $1,824.02 per ounce as of 0751 GMT.

Powell will deliver his semi-annual testimony before the Senate Banking Committee on Wednesday and the House Financial Services Committee on Thursday. Economists polled by Reuters believe the central bank will implement another 75-basis-point rate hike in July and a 50-basis-point increase in September. They expect the Fed to scale back to a quarter-percentage-point hike in November at the earliest.

OANDA senior analyst Jeffrey Halley commented that a hawkish statement from Powell would strengthen the dollar and yields, and push gold prices down. Otherwise, gold would need a fresh catalyst for a big directional move.

On the technical front, Reuters analyst Wang Tao predicts spot gold to test the support level at $1,821. He sees the bullion going below this level and down to $1,812.

DailyFX strategist Daniel Dubrovsky added that the fundamentals indicate that gold prices may continue falling. The bullion appears to consolidate between resistance ($1,869-$1,879) and support ($1,787- $1,810) and could form a Bearish Rectangle. A break below the support level could signal downtrend resumption. Dubrovsky also noted a Bearish Death between the 20- and 50-day SMA, indicating a downside bias.

FXStreet senior analyst Dhwani Mehta agreed and predicted further downside for gold. Bullion prices repeatedly failed to stay beyond the 200-DMA and dropped to horizontal support at $1,805.  She sees immediate support at $1,800 and then the yearly low near $1,876. On the upside, Mehta expects resistance at $1,845 and then around $1,850 and $1,875.

Meanwhile, two European Central Bank (ECB) policymakers said eurozone governments should not expect unconditional support to prevent borrowing rates from rising too far. Slovak central bank governor Peter Kazimir and his Finnish peer Olli Rehn set a high bar for any ECB intervention in the bond market. Also, European Union leaders are considering including gold in the next round of sanctions against Russia.

In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, dropped 0.16% on Tuesday to 1,073 tons.