Gold Pulls Back As Dollar Rebounds

Key Insights

• U.S. dollar is moving higher against a broad basket of currencies, which is bearish for gold. 
• Treasury yields have also started to rebound after the recent pullback, putting additional pressure on gold markets. 
• A move below the support at $1845 will push gold towards the support level at $1830.

Gold Declined Below $1850

Gold has recently moved back below the $1850 level as traders reacted to the rebound of the U.S. dollar.

The American currency has found enough buyers after the recent pullback, and the U.S. Dollar Index moved from 103.50 to 104.65. Strong dollar is bearish for dollar-denominated commodities, including gold.

Treasury yields have also started to recover. Markets remain worried about inflation and aggressive rate hikes from the Fed, so it’s not surprising to see that the upside trend in Treasury yields remains strong.

While gold is traditionally viewed as a hedge against inflation, rising Treasury yields are bearish for gold markets. In case Treasury yields move back to their recent highs, gold could find itself under more pressure.

Gold Tests Support Near The 20 EMA

Gold faced resistance near $1860 and moved towards the 20 EMA, which is located near the support level at $1845. In case gold manages to settle below this level, it will head towards the next support at $1830.

RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge. If gold declines below the support at $1830, it will head towards the next support level at $1815.

On the upside, gold needs to get back above the $1850 level to have a chance to gain upside momentum in the near term. The next resistance level for gold is located at $1860.

A move above the resistance at $1860 will open the way to the test of the resistance at $1875. If gold climbs above this level, it will head towards the resistance at $1890.

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