Gold News: Gold Price Plunges 2% as Yields Surge and Dollar Strengthens Tuesday

Gold Price Breakdown Targets Key Value Zone

Spot Gold (XAUUSD) is breaking down hard Tuesday and the chart is pointing toward a value zone that traders have been waiting on for weeks. Yields are climbing, the dollar is gaining, and the safe-haven bid is nowhere in sight. Here is what the levels say and what is actually driving this selloff.

Technical Outlook

Spot gold (XAUUSD) is down sharply on Tuesday after taking out the swing bottom at $4644.46. The move solidifies my assessment that traders aren’t interested in buying strength at current levels, but are looking for value. This means we’re likely headed into the short-term value zone at $4495.33 to $4401.84.

The failure to overcome the 50-day moving average on April 17 when buyers had the chance was the first clue that the market was overpriced. The second was the failure of the swing bottom.

Using the 200-day moving average as our reference, the main trend is up. If you’re looking for a dip then here you go. The short-term range is $4099.12 to $4891.54. Its retracement zone at $4495.33 to $4401.84 is the value zone. I’m looking for buyers to return on a pullback into this zone.

If we get a successful test of the value zone then you are in control of the trade. You can then sell it at the 50-day MA or play for a breakout. The pattern repeats over and over. You just have to know if you’re an active trader, willing to take out offers, or a passive trader bidding for the best price. If it fails, then you still have the 200-day MA as your lean.

Longer-term traders should take note because the market is in a position to test the lower end of a key retracement zone. The range it’s working in is $3886.46 to $5602.23. The market has been straddling its 50% to 61.8% retracement zone at $4744.34 to $4541.88 since February 2. The short-term retracement zone I mentioned earlier is slightly below the major zone.

As far as the moving averages are concerned, we have the 50-day MA at $4853.60 acting like short-term resistance. The 200-day MA held as support at $4091.41, when it bottomed at $4099.12 on March 23. Keep an eye on this one too if it’s tested.

Yields and the Dollar Running the Show

Spot Gold (XAUUSD) is trading at $4,598.68 at 12:50 GMT, down $83.28 on the session. That is nearly 2% in one session and the selloff is not coming from geopolitical fear reversing. It is coming from yields and the dollar moving against gold at the same time.

The 10-Year U.S. Treasury yield is pushing to a three-week high. When yields climb that fast, gold loses the argument. Investors have a paying alternative and they are taking it. The U.S. Dollar Index is strengthening on top of that, making gold more expensive for every buyer outside the United States. Two headwinds hitting simultaneously is not a setup gold can easily fight through.

Central Banks Adding Pressure

Three of nine Bank of Japan board members voted to hike Tuesday. On a central bank that has spent years resisting any move toward tighter policy, that is not a minor dissent. Inflation tied to the Middle East conflict is pushing even the most patient policymakers off the sideline. Tighter policy in Japan tightens conditions everywhere and gold is already paying for it.

The Fed holds this week and the market is not treating that as a green light for gold. Higher-for-longer is still the operating assumption and nothing on Tuesday changed it. The European Central Bank, Bank of England, and Bank of Canada all announce this week too. One hawkish surprise from any of them and this selloff has more room to run.

The way I see it, gold is headed for the value zone at $4495.33 to $4401.84. That is where I expect buyers to show up. Unless yields reverse hard or geopolitical risk escalates sharply, the path of least resistance is lower until that zone gets tested.

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