Gold pulled back ahead of the Fed as RSI implies selling signal
Gold prices rallied to hit $2009 on Monday, refreshing the yearly high as the repercussion of banking sector turmoil boosted the demand for safe-haven assets. However, the precious metal failed to sustain the bullish strength, pulling back notably to around $1975 into the close.
On Tuesday, the market sentiments seem to improve slightly with the US bond yields bouncing off across the curve overnight, despite US dollar measured by the US dollar index (DXY) still under pressure below 104.00. At the time of writing, the 10-Year US Treasury yield climbed back above 3.50%, and the front-end 2-year Treasury yield rose above 4.00% again.
As gold is an non-interest bearing-asset, holding gold tends to have higher opportunity cost in a yields rising environment. Thus, gold prices usually go lower when the return on cash rises and vice versa.
With the hotly-anticipated Fed Rate Decision ahead on Wednesday, markets are now expecting the policymakers to announce an 25-basis point rate hike, according to the Bloomberg.
From a technical perspective, Gold prices continue to retreat from the recent high and have tentatively broken below the immediate support around $1975. The RSI indicator pulls back from the overbought area for the second time in this year, which can suggest the bullish momentum is fading. If the RSI reverses lower in the coming days, the gold prices may drop further, just as what happened in January 2023.
On Tuesday, the market sentiments seem to improve slightly with the US bond yields bouncing off across the curve overnight, despite US dollar measured by the US dollar index (DXY) still under pressure below 104.00. At the time of writing, the 10-Year US Treasury yield climbed back above 3.50%, and the front-end 2-year Treasury yield rose above 4.00% again.
As gold is an non-interest bearing-asset, holding gold tends to have higher opportunity cost in a yields rising environment. Thus, gold prices usually go lower when the return on cash rises and vice versa.
With the hotly-anticipated Fed Rate Decision ahead on Wednesday, markets are now expecting the policymakers to announce an 25-basis point rate hike, according to the Bloomberg.
From a technical perspective, Gold prices continue to retreat from the recent high and have tentatively broken below the immediate support around $1975. The RSI indicator pulls back from the overbought area for the second time in this year, which can suggest the bullish momentum is fading. If the RSI reverses lower in the coming days, the gold prices may drop further, just as what happened in January 2023.