Dollar's Rebound Spells Trouble for Gold Investors
The US dollar has regained its strength over the past week, rebounding after twin failures beneath a key support zone. This renewed bid is putting pressure on gold, which is coiling within a bearish technical structure known as a bear pennant.
The dollar's surge is closely tied to rising front-end Treasury yields, with the strengthening inverse relationship between the two assets causing fresh headaches for gold investors. The correlation matrix shows a sharp increase in DXY's positive relationship with front-end US yields over the past week, particularly with shorter-term rates, where the correlation has jumped to 0.87.
Gold bulls will be licking their wounds after Friday's lurch lower, which saw the price take out the uptrend that had been in place from before the bullish breakout in early August. The abrupt downward move followed by the contracting price range resembles a bear pennant, warning of a potential resumption of the prior bearish move and retest of lower levels.