Gold Price Prediction – Gold Pulls Back As Treasury Yields Rise

Key Insights

• Gold found itself under pressure at the start of the week. 
• Treasury yields are moving higher as traders focus on the upcoming Fed Interest Rate Decision. 
• A move below $1700 will push gold towards the recent lows near $1680.

Higher Yields Put Pressure On Gold

Gold  is moving lower at the start of the week as Treasury yields rebound after the recent pullback.

The decline in Treasury yields provided material support to gold at the end of the previous week. In addition, gold was in the oversold territory, so some traders were ready to make bullish bets after the strong sell-off.

Currently, the yield of 10-year Treasuries has settled above the 2.80% level. There’s a strong technical support near the 2.70% level, so a move below 2.70% can push gold to higher levels. Lower yields are bullish for gold that pays no interest.

Traders must also monitor the dynamics of the U.S. dollar. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has recently managed to get below the support at 106.50 and is moving towards the 106 level. The continuation of the current pullback may provide more support to gold.

All Eyes On The Fed

It remains to be seen whether gold will be able to gain sustainable upside momentum ahead of the Fed Interest Rate Decision, which will be released on Wednesday. Markets expect that the Fed will raise the rate by 75 bps.

A rising interest rate environment is bearish for gold, but the key question is whether higher rates have been already priced in by the markets.

At this point, it looks that bulls will remain cautious ahead of the Fed decision. Inflation is a key problem for the Fed, so Powell’s commentary may be hawkish, which will be bearish for gold and other precious metals.

A move below the $1700 level will push gold towards the recent lows near the $1680 level. Gold has left the oversold territory, so there is plenty of room to gain downside momentum in case the right catalysts emerge.

On the upside, gold must get above the resistance area in the $1740 – $1750 range to have a chance to gain sustainable upside momentum.

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