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Gold Price Could Climb as US Treasury Yield Plunges

Gold Price Could Climb as US Treasury Yield Plunges

Rich Dvorak, Analyst

GOLD PRICE – TALKING POINTS

  • XAUUSD continues to base around $1,275 as gold bulls adamantly defend technical support
  • US China trade war uncertainty is helping push long-term interest rates lower which is boosts the relative attractiveness of gold
  • Check out this article on How to Trade Gold or download the free DailyFX Q2 Gold Forecast for comprehensive fundamental and technical analysis

Spot gold slipped roughly half a percent during Tuesday’s trading session to close at $1,279 as commodity traders continue to wrestle over the shiny metal’s next direction. The small stumble in XAUUSD could be explained by broad-based strength in the US Dollar and reports of weak inflation expectations. Gold prices could catch a bid in the near future, however, considering signals sent by the US bond market regarding demand for safe-havens.

GOLD PRICE CHART: DAILY TIME FRAME (DECEMBER 28, 2018 TO MAY 28, 2019)

Spot Gold Price Chart vs US 10-Year Treasury Yield

A sizable disconnect between spot gold and long-term interest rates emerged since mid-April and the gap between XAUUSD and US10YR appears to have only widened. With the 10-Year Treasury yield now taking a nosedive to 2.27 percent – its lowest reading since September 2017 – appetite for risk continues to wane in response to mounting US China Trade War risk and slowing global growth concerns. Yet gold bulls have shied away from the commodity as of late, likely in response to a damaged technical picture judging by the short-term bearish downtrend formed from the series of lower highs after prices peaked near $1,340 earlier this year.

But, the slide lower looks to have found technical support as XAUUSD bases around the $1,275 price level with spot gold threatening to rise once again alongside investor demand for safe-havens. As the longer-term bullish uptrend line drawn from the August 2018 low continues to hold in addition to the 38.2 percent Fibonacci retracement area, spot gold has potential to quickly target and reclaim the psychologically-important $1,300 price level as the US10YR rate holds multi-year lows.

- 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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