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Gold Price Outlook: Rising Yields Threaten Bull Flag Breakdown

Gold Price Outlook: Rising Yields Threaten Bull Flag Breakdown

Rich Dvorak, Analyst

GOLD FORECAST: PRECIOUS METALS STILL PRESSURED BY RISING REAL YIELDS, US DOLLAR STRENGTH

  • Gold price action extends lower to start the week as real yields and the US Dollar rise further
  • Precious metals have faced serious headwinds and risk dropping into bear market territory
  • Gold outlook could turn even more downtrodden with a breakdown of its bull flag pattern
  • Sharpen your technical analysis skills or learn about implied volatility trading strategies!
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Precious metals continue to lose their luster as gold and silver prices extend their selloff. Gold price action just dropped another -1.2% during Monday trade to print a fresh nine-month low and leaves it the most oversold since August 2018. The price of gold now hovers on the brink of bear market territory near $1,680/oz. This latest stretch lower could see gold selling pressure accelerate due to the latest breakdown of technical support around $1,690/oz.

GOLD PRICE CHART WITH US DOLLAR INDEX OVERLAID: WEEKLY TIME FRAME (DEC 2019 TO MAR 2021)

Gold Price Chart Forecast with US Dollar Index Overlaid

Chart by @RichDvorakFX created using TradingView

One primary driver of gold price weakness has been surging real yields. More recently, the rise in real yields has also corresponded with a stronger US Dollar. This poses a major headwind for gold bulls considering the precious metal typically maintains an inverse relationship with the US Dollar.

Gold Mixed
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of clients are net long. of clients are net short.
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Weekly 2% 0% 2%
What does it mean for price action?
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Gold price action appears to be at a critical juncture with its broader bull flag chart pattern now in jeopardy following the latest stretch lower. Failure to catch a bid off this key technical barrier might open the door to a deeper pullback toward long-term trendline support extended through the April 2019 and March 2020 swing lows. If a rebound attempt comes into play, however, gold bears might look to fade the 20-day simple moving average.

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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

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