Intraday selling bias was also influenced by strong USD follow-through buying.
In the wake of the Ukraine crisis, the risk-off attitude could help to limit the downside.
Gold fell to an almost two-week low on Friday, falling around $1,930 during the first half of the European session. Jerome Powell, Fed chair, spoke at an International Monetary Fund conference and sounded very hawkish. He all but confirmed that a 50-bps rate increase would be made at the next policy meeting on May 3-4. Powell hinted at future increases and the markets quickly priced in three jumbo rates hikes for this year. This was evident in the prolonged selloff in US fixed income markets, which drove the US Treasury bond yields closer to their multi-year highs and weighed down on non-yielding gold.
The benchmark 10-year Treasury yields rose back to the 3% level following the hawkish rhetoric. In addition, the real interest rate was positive for the first two years. The rising Euro area yields continued to undermine gold prices. This was after Joachim Nagel (President of Germany's Bundesbank) said that the ECBC could increase interest rates in the third quarter. The money markets now expect a 25 basis point (bps), increase by July, and more than 70 bps of tightening before year-end. This would bring benchmark interest rates to zero, for the first time since 2013.
The US dollar was able to profit from the overnight turnaround of the weekly low due to the possibility of a tighter Fed policy. On the last day, the USD Index rose to its highest point since March 2020. This was considered another factor that could undermine the dollar-denominated currency gold. The safe-haven metal could be attractive as a hedge against rising costs because of concerns about the worsening Ukraine crisis.
The release of the S&P Global Composite Purchase Managers Index, (PMI), in the New York session is important. An initial reading of 58.1 shows outperformance compared to the print of 57.7.
Technical analysis of Gold Price
XAU/USD formed a double bottom chart pattern on an hourly basis. This indicates a bullish reversal in the absence of high volume sellers while retesting the critical bottom. After Wednesday's $1,939.31 low, the gold prices saw a stunning upside. Relative Strength Index (14) has stayed out of the bearish zone between 20.00-40.00. The precious metal also established a higher than 20-period Exponential Moving Average, which indicates more gains ahead.