Analysis by Golden FX Link Capital business manager Chhea Chhayheng
Rising bond yields have been erasing the interest from traders to buy gold in comparison to the dollar as the bullish angle is technically possible at the key psychological support. “It’s just the second week of 2022, and gold is already looking at two major obstacles it needs to come to terms with – surging US Treasury yields and Federal Reserve’s quantitative tightening (QT),” Kitco News market reporter Anna Golubova said on Monday.
She added that “in response to a more hawkish tone, bond yields climbed to multi-year peaks, which is adding pressure on gold price action”.
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“Yields continue to rise and many risk assets, equities and crypto continue to struggle. The market has moved to boost the chance hike by the Fed in March and has begun leaning toward four hikes this year,” she quoted Bannockburn Global Forex chief market strategist Marc Chandler as saying.
Jim Wyckoff reported for Kitco that “Gold prices [were] modestly down in midday US action Monday. Rising government bond yields around the gold are working against the safe-haven metals bulls”.
The senior market analyst and columnist added: “Global stock markets were mixed overnight. US stock indexes are solidly lower at midday. Trader and investor risk aversion is keener early this week. Rising bond yields amid tighter monetary policies from major central banks of the world are giving the marketplace pause.
“Last week the Federal Reserve suggested it will raise US interest rates three times in 2022, in order to curb rising inflation that is becoming more problematic. Some analysts expect more than three rate hikes from the Fed this year.”
Technically, gold prices are still moving weekly in the range of $1,762 to $1,830 per ounce, which shows that market is not yet to break to any trend.
In daily charts, gold prices are sideways in a symmetrical triangle pattern that begins to get smaller in the range waiting for the break-out, meaning that the market can break to key support or key resistance.
For a bearish side, traders can sell at $1,820, setting a take-profit function at $1,802 and a stop-loss at $1,831. Conversely, a buy-position can be placed at the key psychological support of $1,800, with $1,823 for the take-profit and $1,785 for the stop-loss.
