Gold Prices Set For Potential Bearish Breakout on Hawkish Fed

Fundamental Forecast for Gold Price: Bearish

Gold Analysis and Talking Points:

  • Gold prices[1] slipped after rising US bond yields supported the USD[2] recovery
  • Focus next week will be on the FOMC[3] rate decision alongside US NFP report

Softer Gold Prices set to Continue

Gold notably softer for the week with prices slipping some 1.5% as the precious metal eyes the bottom end of its range. The crowded short USD trade has begun to unwind with the greenback seeing a near 2% rise this week as the US 10yr treasury yield breached 3% (highest since January 2014, while geopolitical tensions have eased somewhat amid the historic Korean summit. This suggests the trend lower in Gold is set to continue with prices targeting the bottom of its 2018 range.

USD Bulls Charging

The US Dollar[4] is on course for its best week since 2016 amid the push higher in US treasury yields (4yr highs), which had seen the greenback push firmly through 91.00 and now eying the 23.6% Fibonacci retracement of the 2017-2018 fall (103.84-88.19) at 91.88 before a look at 92.00. As the US 10yr treasury yield broke the psychological 3% level, demand had been sapped from the non-interest yielding asset. Rising US yields are set to continue alongside increased bets of a more hawkish Fed, reflected in the latest CME FedWatch with expectations of 3 additionally rate hikes up slightly at 46% from 44.2%.

Gold Prices Set For Potential Bearish Breakout on Hawkish Fed

Source: CME

Trade War and Korean Tensions Diminished

Geopolitical tensions have somewhat diminished this week subsequently weighing on gold prices. The US administration led by Treasury Secretary Mnuchin is to meet with Chinese

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