Gold Price (XAUUSD) Looks Stable, How Will Interact With Stocks?

Gold Price (XAUUSD) Looks Stable, How Will Interact With Stocks?

Gold is trading near $1819 an ounce, unable to take advantage of a spike in geopolitical risks due to an environment of rising interest rates. Two-year US government bond yields have reached 1.06%, pre-pandemic levels.

Rising yields on expectations of a sharp Fed key rate hike this year (compared to the previous tightening cycle) are putting pressure on the stock market, where Nasdaq futures are losing 1.3% since the start of the day and 9% from their late November peak.

The debt market's continued reassessment of the outlook for monetary policy is a severe threat to gold. Its price is now above the 50- and 200-day moving averages, reflecting the strength of buyers in previous months.

We have also previously noted a sequence of increasingly higher local lows. But as the market enters higher levels of volatility, previous local support levels might not hold.

While in previous days, we could see gold strengthening along with growth stocks falling, there are now increasing signs that the sell-off in the markets is taking on a global nature, affecting almost all asset classes.

In this environment, a break of the upward support line (now around $1800) can only further increase the volatility of gold prices. Further stocks sell-off could send gold to retest the $1760-1770 area before the end of the week. If it fails, we could see a sharp dip towards $1730 or even $1680.

Gold struggling to withstand market pressure - 1

Alex Kuptsikevich

Alex Kuptsikevich

Financial market professional with 16-years' experience and Senior financial analyst at FxPro. Author of daily reviews on the impact of economic events with comments regularly featured in top international and Russian media. Covers fundamental analysis, global markets, foreign exchange market, gold, oil, cryptocurrencies.

Alex Kuptsikevich is a regular contributor to both digital and print media including CNBC, Forbes, Reuters, MarketWatch, BBC and Coindesk.