Gold Price (XAUUSD) Struggling Through Influence Of Strong Dollar (USD), Fed, Interest Rate, Rising Yields And More

Although US Bonds Yields May Be Higher, Current Circumstances Are Not Clear As US CPI Release And Correlated Fed Interest Rate Decision In June Are To Shape Markets, US D
  • A multi-year high in the US Dollar seems to be no problem for the price of gold

  • Rising real yields, typically a bearish macro driver, have not stopped the shiny metal

  • Stock market sentiment is pessimistic and bond flows are downright bearish. Amid a rebound in commodities, gold ETF flows have been robust.

Gold prices approach $2,000 once again. After spiking to an all-time high in early March at $2,080, the yellow metal dropped under $1,900, albeit briefly, twice in March. Geopolitical fears tied to Russia’s invasion of Ukraine sparked a buying spree across most commodities, and gold was among those bid. A troy ounce rose more than 10% from its January trough under $1,800. After a reset lower over the latter three weeks in March, another commodity revival brings us back to the psychological $2,000 figure.

Rebecca Duthie: ECB Announcements to Possibly Tighten Monetary Policy Strengthens the Euro. EUR/USD, EUR/GBP, AUD/NZD and EUR/CHF All Increased | FXMAG.COM

Higher Real Yields

What’s unusual about gold’s latest thrust is that it comes amid rising real yields. Typically, gold prices sputter when real rates climb. That long-time market correlation has broken down recently. When assets deviate from norms, attention should be paid. In this case, there might be more to gold’s move since it comes in the face of what should be a bearish macro trend.

Commodity Tailwinds

Our Global Cross Asset Market Monitor report, which hits client inboxes each Monday morning, reviews our latest thinking on the precious metal. Commodities continue to run hot in 2022 after posting enormous gains last year. Momentum is clearly with the bulls as money exits bonds and sentiment continues to be awful in the equity space.

Related Article: (XAGUSD) Price of Silver Vs. U.S Yields, Lumber and Corn Futures Dependent on Demand and Supply | FXMAG.COM

Multi-Year Dollar Highs

Investors are finding solace in commodities. The old trading adage, “if you drop it on your foot and it hurts, then you want to own it” is en vogue. The theme could be long-lasting, and we expect commodity-related stocks to perform well over the coming 5-10 years. Another intriguing aspect of the recent jump in gold prices is that it comes amid a rising US Dollar. Thus, priced in other currencies, gold’s jolt is even more jarring.

Featured Chart: Gold vs. FX Market Breadth

chart of gold price vs gold fx market breadth indicator

Price Levels

There has been decent broad-based technical momentum behind the price move, buttressing the bullish argument. Should gold rise above $2,000, all eyes will be on the March peak. A move above $2,080 could lead to a wave of new money stepping in. Speaking of money flows, our weekly report highlights that ETF flows to gold are starting to heat up (albeit Gold Miners seem to have been left behind). The stage could be set up for a near-term advance. This is something to watch as we approach the notoriously shaky May through September period of a mid-term election year.

Read next: Unexpectedly Gold Price (XAUUSD) Falls, Canada And Chicago - Weather Makes Wheat Futures Fluctuate. The Price Of Palladium - Industrial Activity Is Taking Strain | FXMAG.COM

Bottom Line: Gold prices have been creeping back up as investors seem focused on other commodities and asset classes. While stock market sentiment is in the doldrums and the media fixates on rates, the commodity index is not far off its Q1 high. Gold prices in particular are rallying in the face of what are usually bearish macro trends.

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Although US Bonds Yields May Be Higher, Current Circumstances Are Not Clear As US CPI Release And Correlated Fed Interest Rate Decision In June Are To Shape Markets, US D

Callum Thomas

Head of Research

Callum is the founder and managing shareholder of Topdown Charts. His career background is in multi-asset investment management in New Zealand and Australia, with a focus on investment strategy and economics.  

Callum has a passion for global economics and asset allocation strategy and has developed strong research and analytical expertise across economies and asset classes.  Callum's approach is to deploy a blend of factors to build out a holistic picture and raise conviction. This includes valuations, monetary conditions, cyclical indicators, sentiment, and technicals.  Callum believes innovation is vital to maintaining an edge through investment research and is on a constant mission to uncover and develop new datasets, indicators, and new ways of looking at the world to drive sensible and profitable decision making by portfolio managers.