Gold Slumps Ahead of Fed’s Verdict
Gold prices slumped on Tuesday, extending losses into a second day, as U.S. Treasury yields continued to push higher ahead of the Federal Reserve decision.
The yellow metal (XAU/USD) fell to a low of $1,805 an ounce during the New York session despite the risk-averse environment as investors increase their bets that the Fed could “surprise” with a higher than expected rate hike.
Jerome Powell & Co. has hinted at a 50 basis points hike in June and September. However, after CPI data on Friday showed U.S. inflation reached yet another four-decade high of 8.6%, some participants now expect the FOMC to raise rates by 75 bps.
As a result, U.S. Treasury yields have reached fresh multi-year highs, underpinning the greenback and weighing on the non-yielding metal. The yield on the 10-year note climbed to an 11-year high of 3.497% on Tuesday.
From a technical perspective, XAU/USD holds a bearish short-term bias according to the daily chart. The price trades below its main moving averages after breaking below the 20-day SMA on Monday, while indicators have entered negative territory.
The RSI has gained downward slope and is deep into the red, although still not hitting oversold levels, while the MACD has printed a red bar.
The immediate support level is seen at the $1,800 threshold, with a break below this level paving the way for a retest of the May low at $1,786 and then the $1,760 area.
On the other hand, the convergence of the 20- and 200-day SMAs offer key short-term resistance at the $1,840-45 zone. A break above this area could ease the immediate bearish pressure exposing the next target at $1,880.
The yellow metal (XAU/USD) fell to a low of $1,805 an ounce during the New York session despite the risk-averse environment as investors increase their bets that the Fed could “surprise” with a higher than expected rate hike.
Jerome Powell & Co. has hinted at a 50 basis points hike in June and September. However, after CPI data on Friday showed U.S. inflation reached yet another four-decade high of 8.6%, some participants now expect the FOMC to raise rates by 75 bps.
As a result, U.S. Treasury yields have reached fresh multi-year highs, underpinning the greenback and weighing on the non-yielding metal. The yield on the 10-year note climbed to an 11-year high of 3.497% on Tuesday.
From a technical perspective, XAU/USD holds a bearish short-term bias according to the daily chart. The price trades below its main moving averages after breaking below the 20-day SMA on Monday, while indicators have entered negative territory.
The RSI has gained downward slope and is deep into the red, although still not hitting oversold levels, while the MACD has printed a red bar.
The immediate support level is seen at the $1,800 threshold, with a break below this level paving the way for a retest of the May low at $1,786 and then the $1,760 area.
On the other hand, the convergence of the 20- and 200-day SMAs offer key short-term resistance at the $1,840-45 zone. A break above this area could ease the immediate bearish pressure exposing the next target at $1,880.
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