Gold Retreats As Treasury Yields Move To New Highs

Key Insights

• Precious metals are losing ground as Treasury yields are rising fast. 
• The dynamics of the U.S. government bond markets will remain the key catalyst for gold in the upcoming trading sessions. 
• A successful test of the support at the 20 EMA will push gold towards the support level at $1915.

Gold Is Under Pressure At The Start Of The Week

Gold is currently testing the support level at the 20 EMA near $1935 as higher Treasury yields and stronger dollar put pressure on precious metals.

Rising yields will be the key catalyst at the start of this week. The yield of 2-year Treasuries has already managed to get above the 2.40% level, and it looks that it could soon reach the 2.50% level. Higher yields are bearish for precious metals that pay no interest.

Meanwhile, the U.S. dollar is gaining ground against a broad basket of currencies as higher yields make it more attractive in comparison with lower-yielding currencies like euro. Stronger dollar is bearish for the dollar-denominated gold.

In the near term, rising yields will likely remain the strongest bearish catalyst for gold. The key question is whether geopolitical uncertainty, which increases demand for safe-haven assets like gold, will be able to offset the negative impact from rising yields and stronger dollar.

Most likely, falling gold prices will put pressure on the VanEck Gold Miners ETF at the start of today’s trading session. Gold’s recent attempt to settle above the $1950 level failed to push GDX above the $39 level, and it looks that this resistance level will remain a material obstacle on the way up for GDX.

Technical Analysis

Gold is testing the support level at the 20 EMA. In case this test is successful, gold will move towards the next support at $1915.

A move below the support level at $1915 will push gold towards the next support at the 50 EMA near $1905. If gold manages to settle below the 50 EMA, it will head towards the support level at $1880.

On the upside, a move above the 20 EMA will push gold towards the resistance at $1950. In case gold settles above this level, it will head towards the next resistance level, which has recently emerged at $1965. A move above this level will push gold towards the resistance at $1975.

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