Where Did You Gold? - Dollar Pressures Gold Downwards Amid Rising Yields

Illustration photo of Gold Price H4 Chart from dailyfx.com

Gold prices plunged as much as 5% over a two-day period, the most since last September. The primary factors for the plunge are the climbing longer-dated U.S. Treasury yields and a rebound on the greenback. While other commodities such as copper and iron ore have suffered a pullback as well, it is not as comparable to the precious metal. This could be due to a lack of industrial applications for gold as opposed to base metals. 

Rising Treasury yields has also increased the opportunity cost for holding non-yield assets such as gold. This demonstrates a negative relationship between the 10-year Treasury yield and the yellow metal. 

Rebounding from a two-and-a-half year low to 90.40, the U.S. Dollar Index rose 1.15% over three days. Gold bulls may be partially compensated if foreign currency is used to invest in the precious metal. 

Gold prices have crashed below the ascending channel with a strong downward momentum. There is a “Death Cross” on the moving average convergence divergence (MACD) indicator that suggests a near-term bearish momentum. Key support level is found at $1807 which may break at the previous low of $1770.

FOLLOWME XAU/USD Overall Sentiment (As of 6:20 p.m., Jan 11, 2021)

Short - 50.86%

Long - 49.14%

Source: dailyfx.com