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Gold prices steady as US dollar, yields, weaken

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Written by:
Myrsini Giannouli

19 May 2022
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Gold prices reached a 13-week low of $1,799 per ounce last week, pushed down by the strong dollar and US yields. Gold traded mostly sideways on Wednesday, fluctuating around the $1,815 per ounce level. If the price of gold decreases, further support may be found at $1,782 per ounce, while resistance may be found at around 1,920 per ounce and higher up at $2,000 per ounce.

The price of gold is balanced between conflicting market forces, supported by risk aversion sentiment but pushed down by high dollar and real yields. The price of gold has been supported by increased risk aversion sentiment in the past few months, as. Over the past few months, geopolitical tensions have turned traders towards safe-haven assets, propelling gold prices close to an all-time high of $2,075 per ounce earlier in the year. Even though the war in Ukraine continues, gold has been overbought in the past few months and its potency as a safe-haven asset is beginning to wan. With risk appetite returning to markets though, gold becomes even less appealing to market investors. 

The US dollar and Treasury yields have also been rising against competing assets. The dollar regained some of its lost ground on Wednesday, with the dollar index climbing back to 103.9. The USD, which has been moving into overbought territory, softened this week, while US yields moved to more moderate rates, with the US 10-year treasury note yielding less than 3% on Wednesday. Real yields compete directly with gold, which is a non-interest-bearing asset, and their rise puts pressure on the price of gold.

Inflationary pressures are known to support the price of gold, which is often used as an inflation hedge. As US inflation rises though, the USD and US yields grow stronger, pushing the price of gold down.

XAUUSD 1hr chart

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Written by:
Myrsini Giannouli

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