Gold Prices Weaken on Strong Dollar, Firm Treasury Yields and Demand for Riskier Assets

Key Takeaways

• US banks undercapitalization fears driving demand for gold
• Long-term demand for gold remains strong
• Short-term volatility expected due to strong dollar, steady Treasury yields
• Potential economic fallout could support demand for gold as a safe haven

Overview

Gold prices experienced a decline in futures on Monday due to a stronger US dollar, steady US Treasury yields, and a demand for higher risk assets, after hitting a multi-year high of over $2,000 last week on fears regarding the banking sector.

At 05:00 GMT, June Comex Gold futures are trading at $1994.00, down $7.70 or -0.38% and the XAU/USD is at $1972.82, down $18.55 or -0.93%. On Friday, SPDR Gold Shares ETF (GLD) settled at $183.65, down $2.09 or -1.13%.

Despite this dip, concerns regarding undercapitalized US banks are expected to continue to underpin gold prices.

The market is currently pricing in a nearly 90% chance of the Fed standing pat on interest rates at its May meeting, but the precious metal is likely to receive continued support from major macro developments.

While higher interest rates tend to discourage investment in non-yielding bullion, long-term concerns regarding the stability of the banking sector and potential economic fallout could continue to support demand for gold as a safe haven asset.

Overall, investors seeking a safe haven amid market volatility and economic uncertainty may continue to view gold as an attractive asset.

In the short term, gold prices may be volatile due to a stronger US dollar, steady US Treasury yields, and a demand for higher risk assets, but long-term demand for gold is likely to remain strong.

Daily June Comex Gold Technical Analysis

The main trend is up according to the daily swing chart. However, the chart pattern is starting to show signs of a momentum shift as traders await more clarity on the banking crisis.

A trade through $2031.70 will signal a resumption of the uptrend. A move through $1953.70 will change the main trend to down.

The minor range is $2031.70 to $1953.70. The market is currently straddling its retracement zone at $1992.70 to $2001.90. A second minor support target is $1968.90.

The short-term range is $1830.20 to $2031.70. If the trend changes to down then its retracement zone at $1931.00 to $1907.20 is likely to be tested.

On the upside, the next major resistance is the April 18, 2022 main top at $2045.80.

Daily June Comex Gold Technical Forecast

Trader reaction to the minor 50% level at $1992.70 is likely to determine the direction of the June Comex Gold futures contract on Monday.

Bearish Scenario

A sustained move under $1992.70 will indicate the presence of sellers. If this creates enough downside momentum then look for a sharp break into $1968.90. This is the last potential support before the $1953.70 main bottom.

Bullish Scenario

A sustained move over $1992.70 will signal the presence of buyers. Taking out $2001.90 will indicate the buying is getting stronger. This could trigger a surge into the minor top at $2023.90, followed by the main top at $2031.70.