Market update: Gold slipping into multi-week support; volatility remains low

US dollar strength pressures gold, technical outlook bearish

A stronger US dollar, fueled by rising US Treasury yields, is exerting downward pressure on gold prices, driving them to levels not seen in over a month. The precious metal stands only $20 away from reaching a fresh multi-month low, and if this threshold is breached, the technical outlook for gold would further lean towards bearish sentiment.

US dollar continues to ascend with support from Treasury yields

The US dollar's upward trajectory persists, supported by increased US Treasury yields. While the short end of the yield curve remains relatively stable and anticipates unchanged interest rates in the upcoming months, the longer end of the curve experiences elevated yields.

With the 2-10 year curve still inverted by approximately 73 basis points, the narrowing yield curve differential will trend towards flat as the likelihood of a US recession diminishes.

10-year curve Treasury yield curve chart

Market focus on FOMC minutes and Chinese real estate slump

The economic calendar for the week is not expected to significantly impact gold prices until the release of the FOMC Minutes on Wednesday at 19:00 UK time. Following this event, the economic calendar quiets down. Traders should closely monitor the ongoing real estate downturn in China.

Shares of Chinese property giant Country Garden Holdings plunged to a historic low after the company missed bond coupon payments last week and signaled impending challenges. This 18% overnight drop in Country Garden Holdings shares in Hong Kong sparks concerns of a potential Evergrande-style default.

Gold technical analysis

he daily gold chart shows the precious metal near the 200-day simple moving average at $1,904/oz. This longer-dated ma has provided support for gold since mid-December last year. Just below here, is the 38.2% Fibonacci retracement level at $1,903.4/oz. can be seen before the $1,900/oz. the psychological level comes into view. A break below would leave the June 29 $1,893/oz. multi-month low vulnerable.

If gold gets a safe-haven bid, possibly driven by Country Garden, then a break higher will be met by a series of prior lower highs made over the last month. These may prove difficult to overcome in the short term.

Volatility also remains low in the precious metal - along with a number of other markets - and this makes any sharp price moves less likely.

Gold daily chart

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