Gold edges up, faces pressure from U.S. rate hike bets
· Gold prices edged up on Wednesday as a slight dip in U.S. bond yields provided some support against growing expectations of quicker-than-expected U.S. interest rate hikes that also pushed the dollar to a multi-month high.
· Spot gold rose 0.3% to $1,739.34 per ounce by 0548 GMT, having hit an over one-month trough on Tuesday.
· U.S. gold futures edged 0.2% up to $1,740.20.
· “What you’re seeing this morning is just a technical bounce ... There is a very little bullish case for gold right now,” said OCBC Bank economist Howie Lee.
· “We see gold at around $1,500 by the end-2022, especially with tapering having completed its course by then and the Fed looking to start raising its interest rates.”
· The dollar index hovered near a more than 10-month high, touched on Tuesday.
· Though the benchmark U.S. 10-year Treasury yields eased off a bit, it held above 1.5%, a level last seen in June.
· Higher yields raises the opportunity costs of holding non-interest bearing bullion.
· St. Louis Federal Reserve President James Bullard on Tuesday cautioned high inflation may require more aggressive steps by the central bank, including two interest rate hikes in 2022.
· In congressional testimony, Fed Chair Jerome Powell said the U.S. economy is still far from achieving maximum employment, a key component of the central bank’s requirements for raising interest rates.
· Having broken through a support at $1,740, gold could test $1,700 this week if tapering repricing continues, Jeffrey Halley, a senior market analyst for Asia-Pacific at OANDA said in a note.
· He added that some risk-hedging with Asian shares easing was supporting bullion.
· Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, slipped to 990.03 tonnes on Tuesday from the day before.
· Gold Price Forecast: XAU/USD rebound eyes $1,750 on softer USD
Technical analysis
Gold struggles to pick up amid sluggish MACD and RSI lines, which in turn hints at further weakness towards retesting the two-week-old descending support line, around $1,727.
However, the RSI line can test the oversold region around then, limiting additional downside.
Ignorance of this could direct the quote to the $1,700 threshold before highlighting the yearly trough surrounding $1,687.
Meanwhile, recovery moves need to cross the immediate trend line hurdle near $1,745 before directing gold buyers to a descending resistance line from September 03, near $1,771.
Even if the quote manages to cross the $1,771 resistance line, a horizontal area established from September 08 and 200-SMA, respectively near $1,782 and $1,788, will challenge the metal’s upside.
Overall, gold remains pressured towards the yearly low but intermediate bounces can’t be ruled out.
· Silver rose 0.1% to $22.45 per ounce.
· Platinum fell 0.2% to $965.58, while palladium gained 1.1% to $1,896.86.
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Reference: Reuters, CNBC, FXStreet
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