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Gold Price Forecast: XAU/USD aims to test two-year low at around $1,610 as yields reaches sky

  • Gold price may revisit two-year low at $1,614.85 as central banks are prepared for a fresh rate hike cycle.
  • The 10-year US yields have printed a fresh 14-year high at 4.14%.
  • A rebound in risk-off impulse has pushed the DXY to near 113.00.

Gold price (XAU/USD) has shifted its business below $1,630.00 after surrendering the cushion in the last New York session. The precious metal has witnessed a steep fall as yields sky-rocketed. The 10-year US Treasury yields refreshed its 14-year high at 4.14% in New York.

Returns on US government bonds approached the sky as odds remain firm for a fourth consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed). As per the CME FedWatch tool, the chances of a 75 bps rate hike announcement by the Fed in November stand at 94.5%. Price pressures in the global economy have not softened in response to the extent of rate hikes by the central banks.

The European Central Bank (ECB) is set to announce a bigger rate hike to curtain inflationary pressures next week. Also, a reclaim of double-digit inflation figures in the UK economy has bolstered the chances of the Bank of England (BOE)’s bumper rate hike announcement.

Meanwhile, the US dollar index (DXY) has reclaimed the critical resistance of 113.00 as the risk-on market mood has faded. S&P500 faced pressure after a two-day rally as investors shifted to long liquidation after making returns on value bets.

Gold technical analysis

On an hourly scale, gold prices have witnessed a steep fall after dropping below the 61.8% Fibo retracement (placed from a two-year low at $1,614.85 to October high at $1,729.58) at $1,659.00. The precious metal looks set to re-visit a two-year low at $1,614.85.

A declining 50-period Exponential Moving Average (EMA) at $1,643.66 indicates more weakness ahead.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which signals that the downside momentum has already been triggered.

Gold hourly chart

 

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