Gold Price Dented by US Dollar Rally

US Dollar Rally and Higher Yields Dent Gold Price as Debt Ceiling Concerns Ease

As US yields rise and debt ceiling worries subside, gold prices fell to a two-month low to start the week.

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Treasury yields have been rising across the curve in recent weeks, but the short end has seen the most change.

The benchmark 2-year bond rose above 4.60% on Friday after falling to 3.66% earlier this month.

Friday's 5.30% 1-year note hit a 23-year high. The market believes the Federal Reserve will not cut rates this year, so it reached 4.03% in early March. Futures and interest rate swaps pushed that idea into 2024.

The “big dollar” may have benefited from US Dollar-denominated debt's higher return.

Silver rallied on Friday despite multi-month peaks against many currencies and a lower commodity complex. It finished down last week and is steady to start this week near US$ 23.30 an ounce.

Rising US real yields hurt gold. Real yield is nominal yield minus the market-priced inflation rate from Treasury inflation-protected securities (TIPS) for the same tenor.

The widely watched US 10-year real yield is approaching 1.60%, a level not seen since the regional banking crisis in March. Investors worry about non-interest-bearing commodities like gold when inflation-adjusted returns rise.

The DXY (USD) Index has been rising steadily, and the precious metal may follow. Gold volatility has been decreasing, which may indicate market acceptance of current pricing.

GC1 (GOLD FRONT FUTURES CONTRACT) TECHNICAL ANALYSIS

Gold is testing the bottom of an ascending trend channel that began in November last year.

The early May high of 2085.4 surpassed the March 2022 peak of 2078.8, but not the all-time high of 2089.2. Failure to break new ground to the upside has created a Triple Top, an extension of a Double Top.

A break above 2080–2090 could signal bullishness. Next resistance may be the upper ascending trend channel line near 2160.

Downside, the ascending trend line is being questioned, making the price interesting. The 100-day SMA and two prior lows are near that trend line.

If 1930 holds, the bull run may continue. Price action in the next few sessions may indicate medium-term direction.