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Gold Price Update – Feeling the Strain as US Treasury Yields Continue to Rise

Gold Price Update – Feeling the Strain as US Treasury Yields Continue to Rise

Nick Cawley, Strategist

Gold Price (XAU/USD), Chart, and Analysis

  • Gold is supported by increased fighting in Ukraine, and growth fears.
  • US bond yields continue to temper any gold outbreak.

Gold is stuck between two conflicting forces with risk-off sentiment battling a further increase in US rate hike expectations. The increased fighting in eastern Ukraine is keeping a lid on risk sentiment, while hawkish Fed commentary is further underpinning US rate hike expectations and the US dollar.

EUR/USD Latest – Toying with a Fresh Two Year Low

US Treasury yields continue to push higher with the benchmark 10-year UST touching 2.90% earlier in the session, the highest level seen since November 2018.

Gold Price Update – Feeling the Strain as US Treasury Yields Continue to Rise

US interest rate hike expectations remain at elevated levels with an additional 215 basis points of rate hikes expected over the rest of the year. These expectations may be raised soon, especially if other Fed voting members follow St. Louis Fed James Bullard’s hawkish rhetoric and call for larger rate increases over the coming weeks and months.

Gold Price Update – Feeling the Strain as US Treasury Yields Continue to Rise

Against these two prevailing forces, gold is struggling to find any clear direction with rallies being sold and dips being bought. Monday’s rally and sharp sell-off left a bearish shooting star candle on the daily chart with a long upper shadow and a close near the low of the day. This pattern suggests the recent uptrend may soon reverse.

How to Trade Shooting Star Candlestick Patterns

Monday’s failed re-test of $2,000 may now act as short-term resistance and help set up a new trading range for the precious metal. Volatility continues to drift lower after hitting multi-month highs in mid-April, while gold is also just moving out of overbought territory after the recent run higher. Initial support is situated between $1,960/oz. and $1,966/oz. with a secondary support zone clustered on either side of $1,920/oz. This range looks set to hold in the short term.

Gold Daily Price Chart – April 19, 2022

Gold Price Update – Feeling the Strain as US Treasury Yields Continue to Rise

Retail trader data show 75.20% of traders are net-long with the ratio of traders long to short at 3.03 to 1. The number of traders net-long is 3.89% higher than yesterday and 5.04% higher from last week, while the number of traders net-short is 3.16% lower than yesterday and 1.73% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Gold-bearish contrarian trading bias.

What are your views on Gold – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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

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