Gold Lacks Momentum As Treasury Yields Move Closer To Yearly Highs

Key Insights

• Treasury yields rebound after yesterday’s pullback, which is bearish for gold. 
• Meanwhile, geopolitical tensions increase, providing support to gold markets. 
• Gold must settle above $1935 to have a chance to gain upside momentum in the near term.

Gold Stays Range-Bound

Gold  has recently made another attempt to settle above the key resistance level at $1935 but failed to develop sufficient upside momentum as Treasury yields have started to move higher again.

The yield of 2-year Treasuries has recently managed to get back above the 2.45% and is moving towards the recent highs at 2.50%. Inflation fears and expectations of an aggressive Fed policy remain the key drivers for rising yields. Higher interest rates are bearish for gold and other precious metals that pay no interest, so the new highs in Treasury yields may put more pressure on gold.

At the same time, geopolitical tensions continue to increase, which is bullish for gold. Russia – Ukraine negotiations have stalled, while the EU prepares a new round of sanctions on Russia. In this environment, gold may get more support from the rising demand for safe-haven assets.

Yesterday, VanEck Gold Miners ETF made an attempt to get to the test of the $40 level but lost momentum as gold failed to settle above the resistance at $1935. While gold remains stuck in the $1915 – $1935 range, gold mining stocks may drift higher as traders realize that higher gold prices are sustainable.

Technical Analysis

Gold continues its attempts to settle above the nearest resistance level at $1935. In case gold gets above the $1935 level, it will gain additional upside momentum and move towards the next resistance at $1950.

A successful test of the resistance at $1950 will push gold towards the resistance at $1965. If gold manages to settle above $1965, it will get to the test of the next resistance level at $1975.

On the support side, gold needs to settle below the $1915 level to have a chance to gain downside momentum. The 50 EMA is located in the nearby, so gold will likely get strong support in the $1910 – $1915 area. A move below this support area will push gold towards the $1900 level. If gold settles below $1900, it will head towards the support level at $1880.

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