The price of gold fell on Monday after an early rise to a two-month high. Market analyst Haresh Menghani says rebounding U.S. bond yields are acting like a headwind for the non-yielding precious metal. The cautious market mood helped limit losses in the safe-haven commodity, according to the analyst. Gold’s outlook this week with analysis by Haresh Menghani cryptocoin.com We have prepared it for our readers.
What do gold investors expect from the Fed?
Gold price witnessed a modest intraday pullback from the two-month highs touched on Monday and dropped to the $1,813-12 region in the early part of the European session. According to the analyst, this was the first day of negative action in the previous three sessions and was supported by a good recovery in US Treasury bond yields that tended to remove flows from the non-yielding yellow metal.
Last week, the Fed stuck to the rhetoric of temporary inflation and said policymakers were in no rush to raise borrowing costs. But investors seem convinced that the US central bank will be forced to adopt a more aggressive policy response to contain stubbornly high inflation. The analyst states that this situation triggered a new rise in US bond yields and acted as a tailwind for the US dollar, which is seen as another factor that puts pressure on the dollar-denominated gold price.
“US CPI data will help determine direction for gold price”
Meanwhile, the cautious mood in global equity markets has provided support for the safe-haven precious metal and has helped limit deeper losses, at least for now. The analyst nevertheless underlines that gold seems to have broken its two-day winning streak and is at the mercy of US bond yields.
In the absence of any major economic announcements from the US to move the market, traders will look for clues from Fed Chairman Jerome Powell’s statements later in US trading. However, the focus will remain on the latest US consumer inflation figures to be released on Wednesday. The analyst makes the following assessment:
CPI pressure will play a major role in influencing market expectations about the likely timing of the Fed’s policy tightening, which will help determine the next leg of a directional move for gold price.
Gold price technical view
From a technical standpoint, the sustained breakout of $1,800 and acceptance above $1,810 last week support bullish investors, according to market analyst Haresh Menghani. Therefore, some trailing strength to test a strong barrier around the $1,832-34 heavy supply zone remains a distinct possibility, noting the following levels:
However, weakness below the $1,800 level could lead to a prolonged easing and pull gold back towards the $1,780 level on its way to the $1,770 support zone.
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