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Gold Price Drops  from 1-Month High as Yields Rebound

Gold Price Drops from 1-Month High as Yields Rebound

Rich Dvorak, Analyst

GOLD PRICE – TALKING POINTS

  • Gold prices slip nearly 1 percent to the $1,285 level as market optimism recovers
  • XAUUSD likely coming under pressure while yields rise
  • Improve your knowledge on XAUUSD with this article on How to Trade Gold

The recent topside breakout in gold has reversed back below its bearish year-to-date trendline with XAUUSD now trading near the $1,285 price level. The move lower is likely in response to rising yields as market sentiment improves from last week’s steep selloff in risk assets.

XAUUSD PRICE CHART: DAILY TIME FRAME (DECEMBER 31, 2018 TO MAY 16, 2019)

Gold Price Chart XAUUSD

Gold has slid roughly 1.25 percent since the commodity topped $1,300 - for the first time since April 11 - earlier this week. The decline in XAUUSD over the last 3 trading sessions keeps bullish prospects at bay considering the latest leg higher has so far failed to eclipse the recent peak of $1,310 printed last month.

Spot gold now looks to find support from the 23.6 percent Fibonacci retracement level drawn from the year-to-date high and low and is where XAUUSD currently trades. If this area of confluence fails to bolster prices, additional downside over the short-term cannot be ruled out – particularly if yields continue to shoot higher.

SPOT GOLD AND US 10-YEAR TREASURY YIELD PRICE CHART: 15-MINUTE TIME FRAME (MAY 03, 2019 TO MAY 16, 2019)

Spot Gold and TNX Treasury Yield Price Chart

Recent weakness in XAUUSD can be primarily attributed to the recovery in yields as bond investors sell US Treasuries in response to waning market angst seeing that higher interest rates makes gold relatively less attractive.

But, the downward-sloping trend in yields could provide gold bulls with hope that XAUUSD may find support soon. Thus, keeping a close eye on US Treasuries remains paramount as yields might serve as a potential gauge as to where XAUUSD heads next in light of the inverse relationship between interest rates and gold.

- Written by Rich Dvorak, Junior Analyst for DailyFX

- Follow @RichDvorakFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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