Gold Technical Analysis: Forming a Descending Channel

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Gold futures contracts are on track to achieve the worst performance for one session in two months, as they fall below $1900 with the start of this important week’s trading. The price of gold fell to the $1855 support level, its lowest in two and a half months. Gold prices have come under heavy pressure from rising Treasury yields and a stronger US dollar. According to the latest performance, gold is retreating from a weekly loss of more than 1%, trimming its annual gain to less than 2%.

All in all, the precious metal is on track for its biggest daily drop since March 9.

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As for the price of silver, the sister commodity to gold, it is also declining with the beginning of this week’s trading. Silver futures fell to $22.64 an ounce. The price of the white metal fell more than 4% last week, increasing its loss in 2022 by 3%. Commenting on the performance, Jim Wyckoff, Senior Analyst at Kitco.com wrote: “Precious metals are being affected earlier this week by bearish external market forces, the strong US dollar index approaching a 20-year high, the strong decline in US crude oil prices and bond yields.”

US Treasury yields were higher across the board, with the 10-year bond yield rising to 2.979%. One-year bond yields rose to 2.066%, while 30-year bond yields increased 0.102% to 3.048%.

Gold is generally sensitive to a higher interest rate environment because it raises the opportunity cost of holding non-yielding bullion.

The US Dollar Index (DXY), which measures the performance of the US currency against a basket of other major currencies, rose to 103.71, from an opening at 103.18. Overall, the index had a brutal start to 2022, rising more than 8%. Over the past 12 months, the DYX US Dollar Index is up 14%.

In general, a stronger US dollar profit is bad for dollar-priced commodities because it makes them more expensive to buy for foreign investors.

Meanwhile, the Federal Reserve will conclude its two-day Federal Open Market Committee (FOMC) meeting on Wednesday. The Eccles Building is expected to raise the benchmark federal funds rate by 50 basis points in the market. Investors are also widely expected that the central bank will pull the trigger on another 50 basis point rise in June. Despite high inflation and a negative headline GDP reading in the first quarter, gold is weakening due to a tightening economy.

In other metals markets, copper futures fell to $4.2605 a pound. Platinum futures fell to $931.30 an ounce. Palladium futures fell to $2,203.00 an ounce.

According to gold technical analysis: On the daily chart, the price of gold is moving within a bearish channel that was formed recently and its momentum increased with breaking the level of $1900 for an ounce. Technical indicators moved towards a bearish direction as soon as the price moved towards the support level of 1855 dollars. Currently, the price of gold is heading towards new buying levels, the most prominent of which are currently 1848 and 1830 dollars, respectively. I still prefer buying gold from every bearish level, as global geopolitical tensions, and the return of anxiety over the outbreak of the epidemic led by China will support the purchase of gold as a safe haven in the end.

On the other hand, in order for the bulls to regain control, the resistance of 1900 dollars per ounce must be breached. The gold market will be affected today by the level of the US dollar and the extent to which investors take risks or not.

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