Gold Rebounds But Technical Pressures Persist Amid Rising Oil Prices and Bond Yields

The gold price has rebounded after forming a lower low below $4,325, but technical and macro pressures persist.

Since the US open, there was a small recovery in the stock market, with the dollar easing lower due to suspected BoJ intervention in USD/JPY. This helped calm nerves and provide some support for gold, but it didn't signal a return to the risk-on, dollar-off trade.

The risk assets remain under pressure despite this small recovery, and investors have little incentive to add risk with bond yields holding onto their gains.

According to Fawad Razaqzada, Market Analyst, there are several pressures reinforcing each other, including oil surging on the US-Iran conflict, raising concerns about inflation and expectations for a more hawkish Fed. Global bond yields continue to rise, making equities and other risk assets less attractive.

One key concern is the unwind of the yen-funded carry trade, as Japan's 10-year government bond yield has broken above 3% for the first time since 1996, making borrowing yen at very low rates more expensive. If investors have borrowed yen to buy US equities, emerging-market assets, gold, Bitcoin or other riskier investments, higher Japanese borrowing costs can force them to reduce those positions.

The technical outlook is also bearish, with the gold price forming a lower high and resistance in the $4,400-$4,436 region. A break below this zone would invalidate the recent bullish move, while a pop above it could lead to a short-term rally back to the $4,515/20 region.