Gold prices soared on Tuesday, climbing above the $1,810 per ounce resistance and reaching $1,820 per ounce. If gold prices decline, support may be found near $1,765 per ounce, while resistance may be encountered near $1,877 per ounce.
The BOJ caused a stir in markets on Tuesday by finally yielding to increased price pressures and tilting its monetary policy in a more hawkish direction. The Yen started to regain its safe-haven status, reducing the dollar’s appeal.
The dollar retreated on Tuesday, affected by the BOJ policy decision, and the dollar index dropped below the 104 level, boosting gold prices. Bond yields across the world jumped on the other hand, and US Treasury yields rose to put pressure on gold prices, with the US 10-year bond yielding almost 3.7%.
Gold prices have been affected largely by US treasury yields lately, as these reflect Fed rate hike expectations. Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise.
Three major Central Banks, the Fed, the ECB, and the BOE raised interest rates last week. Even though the rate hikes were already priced in by markets, the wave of fiscal tightening reignited global recession concerns, driving gold prices down.
This week, markets will still be digesting last week’s major news and the week is light on fundamentals ahead of the Christmas holiday.
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