Gold Struggles to Recover Above $4,200 Amid High US Yields
Gold prices show signs of recovery after hitting two-month lows but remain below the $4,200 mark. The precious metal has found some support from a pullback in the US Dollar Index (DXY), though high US Treasury yields continue to limit gains. The XAU/USD pair is currently trading at $4,165, with immediate resistance seen at $4,230, a level that could ease bearish pressure if broken.
Market sentiment remains risk-averse due to a global bonds sell-off, which is supporting the safe-haven US Dollar. Recent disappointing US labor market data has reduced expectations of a Federal Reserve rate hike in October, with futures markets now pricing in an 80% chance the Fed will stand pat. However, hopes of a December hike remain unchanged.
Technical analysis indicates a bearish trend for gold, with price action capped below $4,230, which is also the neckline of a bearish Head & Shoulders pattern. While momentum indicators show some bullish divergence, upside attempts are still considered frail. The Relative Strength Index (14) stays just below the midpoint, and the Moving Average Convergence Divergence (MACD) suggests mild bullish momentum.
Immediate support is seen near $4,110, with further downside targets at $4,000 and $3,950. Analysts from the DBS Group note that higher yields driven by Fed tightening support the USD, but higher term premia driven by debt supply concerns need not.