Gold prices sink as US dollar rallies on fading Fed pivot bets

Asia-Pacific market briefing – gold prices sink as Treasury yields climb

Gold prices sank 0.77% on Thursday which was the worst single-day performance in almost one week. The yellow metal sank as the US dollar and front-end Treasury yields climbed during the Wall Street trading session. XAU/USD tends to function as the anti-fiat trading instrument in financial markets. That is because of its lack of yield when holding the precious metal outside of expected returns.

XAU turned lower following a couple of notable events. The first is that we had commentary from Federal Reserve Bank of Richmond President Thomas Barkin. He said that it is important to continue tightening to rein in inflation. We also had weekly US jobless claims cross the wires. While the 196k outcome was higher than the 190k estimate, it remains historically low.

All this continues to pour cold water on market expectations that the central bank will pivot to interest cuts later this year. This follows last week’s non-farm payrolls report blowout, which underscored a relatively tight labor market that might be able to withstand the most aggressive tightening in decades. Since then, the markets have been pricing rate hikes back in.

Friday’s Asia-Pacific trading session is notably quiet in terms of economic data. That may continue allowing general risk appetite to set the tone for markets. If bond yields and the US dollar continue climbing, this may pressure gold prices heading into the University of Michigan sentiment data later today. A higher-than-expected print would likely further compound this dynamic.

Gold technical analysis

On the daily chart, gold has closed at its lowest since January 6th, just barely taking out lows from earlier this week. Still, prices remain above the 50-day Simple Moving Average (SMA). The latter may hold as support, maintaining the upside focus. That would undermine the Bearish Engulfing from earlier this month. Otherwise, extending lower would increasingly offer a bearish posture.

XAU/USD daily chart

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.