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Gold Price Analysis: XAU/USD trading with negative bias as bulls eye last week’s lows in $1780s

May 18, 2022

New York (May 18) A pick up in the US dollar as global markets adopt a slightly more risk-off tone and a Eurozone led rise in global yields is exerting pressure on spot gold (XAU/USD) prices, which recently fell back to probe the $1810 per troy ounce mark. Hawkish remarks from Fed policymakers this week (including Chairman Jerome Powell on Tuesday) have emphasised the Fed’s commitment to inflation-fighting even in the face of weaker economic growth, while the ECB policymakers have been talking up the prospect of a summer start to rate hikes and this combo is weighing on stocks/pushing up global yields.

Higher yields raise the opportunity cost of holding non-yielding commodities like precious metals, hence the negative correlation to gold. Meanwhile, a stronger US dollar makes USD-denominated commodities like XAU/USD more expensive for international buyers, also weighing on demand. Against the backdrop of a well-supported US dollar and hawkish central bank-inspired upside in global yields, many gold bears will be eyeing a test of last week's lows in the mid-$1780s. Technicians noted that Tuesday’s test and rejection of the 200-Day Moving Average in the $1830s could prove an important bearish sign going forward. For now, the precious metal is stabilising in the mid $1810s, ever so slightly in the red on the day.


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