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Gold Prices Forecast: XAU/USD Continues Losing Streak Amid Rising US Bond Yields

By:
James Hyerczyk
Updated: Oct 3, 2023, 08:02 GMT+00:00

Gold (XAU/USD) faces its longest losing streak since August 2022, amid hawkish Fed comments and a strengthening U.S. economy.

Gold (XAU/USD)

In this article:

Highlights

  • Gold faces its longest downtrend since August 2022, strained by hawkish Fed remarks.
  • Dollar’s 10-month high and soaring Treasury yields spell trouble for the yellow metal.
  • Spot gold endures a seven-day losing streak, sinking to its lowest since March 9.
  • Fed’s unified stance on high interest rates masks internal debate on future rate hikes.

Overview

Gold (XAU/USD) is in the spotlight as it registers its longest losing streak since August 2022, fueled by hawkish Fed comments and an increasingly robust U.S. economy. With the dollar hitting 10-month highs and Treasury yields nearing 16-year peaks, gold faces multiple headwinds.

The Losing Streak

Spot gold has declined for seven consecutive sessions, marking its lowest point since March 9. The descent comes as Federal Reserve officials emphasized the need for sustained high interest rates to combat inflation. The unity in the Fed’s stance, however, disguises a broader debate on whether another rate hike is on the horizon for this year.

Dollar and Yields: The Double Whammy

The U.S. dollar’s surge to a 10-month high and Treasury yields flirting with 16-year highs have compounded gold’s woes. Both factors are detrimental to bullion, as it’s priced in dollars and yields no interest. This dual pressure is exacerbated by Monday’s data indicating a further recovery in U.S. manufacturing.

Market Sentiment and Key Levels

Investors are keeping an eye on the crucial $1800 per ounce level, which has previously acted as a support. Markets are also factoring in a 45% probability of another 25-basis-point rate hike this year, along with a 42% chance of monetary easing in the first half of 2024.

Short-Term Forecast

The short-term outlook for gold appears bearish. With the Fed maintaining a hawkish stance and economic indicators strengthening the dollar, a break below the $1800 level could trigger further downside. All eyes are now on the upcoming U.S. Labor Department’s JOLTS report, which could provide the next catalyst for market movement.

Technical Analysis

Daily Gold (XAU/USD)

The current Daily price of 1823.53 is notably below both the 200-Day and 50-Day moving averages, which stand at 1927.69 and 1915.92 respectively. This significant deviation suggests bearish sentiment in the long-term context, and it indicates that the market is currently trading at a discount relative to its recent averages. The 50-Day moving average also crossed under the 200-Day moving averages, solidifying the bearish outlook.

The current Daily price of 1823.53 for Gold (XAU/USD) has already breached both the minor and main support levels of 1889.37 and 1883.28, respectively. This is a clear bearish signal that may invite more sellers into the market.

This breach of key support levels, combined with trading below both important moving averages, indicates that the market is in a downtrend. It suggests that the selling pressure has not only been sustained but could potentially intensify.

Regarding trend lines, the current price is also below the trend line support of 1914.15. This adds another layer of bearish outlook, as trend line breaks often signal accelerated moves in the direction of the break.

Therefore, based on these factors—the significant distance below both key moving averages, the breach of essential support levels, and the positioning relative to trend line support—the current market sentiment for Gold (XAU/USD) appears to be strongly bearish.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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