Gold Costs Sink as Powell’s Pivot Lifts Treasury Yields. Will XAU/USD Go Decrease?


  • Gold broke down because the Fed appears set to deal with excessive inflation
  • USD whipped round however Treasury yields going increased dominated gold
  • Actual yields lifted by decrease pricing of inflation. The place to for XAU/USD?

Gold costs fell within the aftermath of Federal Reserve Chairman Jerome Powell testimony earlier than the Senate Banking Committee. In his remarks, he dropped the reference to ‘transitory’ inflationary.

Mr Powell mentioned that the financial system is powerful and inflationary pressures are excessive. He appeared on the subsequent Fed assembly for a dialogue to wrap up the asset buying program a couple of months sooner than beforehand anticipated.

The US Dollar index (DXY) initially spiked increased on the feedback and gold fell on the identical time. Nonetheless, as DXY pulled again to close the place it was earlier than the testimony, gold remained weaker.

His remarks on rushing up the tempo of tapering the asset buy program noticed short-end Treasury yields go increased. 2-year yields leapt round 12 foundation factors (bp).

Market priced inflation calculated by Treasury Inflation Protected Securities (TIPS) nudged decrease as nicely. Inflation pricing has moved considerably decrease since a peak in the midst of final month throughout the curve.

All different issues being equal, this has the impact of lifting the ‘actual yield’ of Treasuries. That’s the fee of return from a safety much less the erosion of inflation. This makes them a extra enticing funding various to the yellow metallic.

With this in thoughts, it seems that yields are a key driver for the outlook on gold costs in the intervening time.

In different information, based on stories from Bloomberg, the Financial Authority of Singapore (MAS) bought 26.three tonnes of the valuable metallic over Could and June earlier this yr.

From the start of Could to the beginning of June, XAU/USD moved from 1770 to a excessive of 1916. By the tip of June, it was again to close 1770.


Gold has moved beneath final week’s low and will have some bearish momentum because it has damaged beneath all quick, medium and long-term simple moving averages (SMA).

The 10, 21, 55, 100, 200 and 260-day SMAs are attainable resistance ranges. Additional resistance would possibly on the pivot factors and former excessive of 1778.69, 18.13.94, 1815.60 and 1834.14.

Assist might be on the earlier lows of 1758.93, 1750.25 and 1721.71.


Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the feedback part beneath or @DanMcCathyFX on Twitter

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