Gold fell 2.2% to $4,192 an ounce on Monday and is down more than 4% this month, as rising bond yields and inflation concerns increase the opportunity cost of holding the metal. Technical analysis points to further downside toward the $3,996-to-$3,942 area unless the bearish trend reverses.
Gold slides on yields and dollar strength
Bullion fell 2.2% to $4,192 an ounce and is down more than 4% this month. Rising bond yields and inflation concerns fuelled by higher oil prices have increased the opportunity cost of holding the non-yielding metal.
The 30-year Treasury yield edged up to 5.52%, close to its highest level since 2004, having risen 27 basis points this month amid persistent inflation concerns and expectations of higher-for-longer Federal Reserve policy. Meanwhile the dollar index advanced to 101.39, a two-month peak, on the back of upbeat US economic figures.
Markets are pricing in a 70% probability of a second consecutive rate increase in October, while the Reserve Bank of Australia is also expected to tighten policy on Tuesday following a run of stronger-than-expected US economic data. Higher rates typically weigh on gold, a safe-haven asset that pays no yield.
Technical picture points lower
Spot gold's August-to-September decline is ongoing, with the 2024-to-2026 uptrend line at $4,131.00 per troy ounce in focus, were a slip through the 22 July high at $4,166.13 to be seen. Further down lies the 11 June trough at $4,220.22, which may also act as minor support ahead of the major support area made up of the June-to-July lows at $3,996.06-to-$3,942.10.
Minor resistance above the early July $4,202.70 high may be spotted around the mid-September low at $4,235.17 and at Friday's $4,315.79 high. The short-term outlook stays bearish while gold trades below the 18 September high at $4,399.67, and the medium-term outlook is bearish on the same basis, targeting the June-to-July lows at $3,996.06-to-$3,942.10.
Source: IG – News and trade ideas
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