Gold Prices Consolidate as Yields Continue to Rise

Key Insights

• Gold prices edged lower
• The Dollar whipsawed
• U.S. Treasury yields surged to nearly a 3-year high

Gold prices moved higher as yields continued to gain traction in the wake of the Fed’s hawkish commentary. Fed Chair Fed said on Monday that the central bank was going to bring the fight to inflation and 50-basis point hikes will not be unusual

The markets are now pricing in 8-twenty five basis point rate hikes in 2022 and another 100-basis points in 2023. The 2023 year-end yield is now near 2.25%. The Fed’s target is demand. They will run into issues with a soft landing as energy prices will remain high due to geopolitical events.

Technical Analysis

Gold moved slightly lower on Tuesday. Resistance is seen near the 10-day moving average at $1,949. Support is seen near the 50-day moving average at 1,880. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Prices are oversold as the fast stochastic prints a reading of 15, below the oversold trigger level of 20.

The medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).