Gold Slips From 3-Month High On Firm U.S. Dollar And Treasury Yields

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Gold prices eased after recording their best performance in four months during the previous session. Stronger dollar and bond yields pulled the bullion down, but the tensions between Russia and Ukraine limited its losses. The higher benchmark U.S. 10-year Treasury yields raised the opportunity cost of owning the non-interest paying gold. And the firmer greenback made the yellow metal more expensive for investors using rival currencies.

Spot gold is currently trading at $1,853.86 per ounce as of 0745 GMT.

DailyFX currency strategist Ilya Spivak noted that opportunistic longs are coming off a bit. There is also a slight consolidation at the current price level. He considered the Russo-Ukrainian crisis a major headwind for the bullion. The situation raises volatility that may drive down yields and would be supportive of gold prices.

Phillip Futures analyst Avtar Sandu agreed and added that momentum would be on the side of gold unless there is an indication of de-escalation. And if the U.S. is right about Vladimir Putin’s intentions, the bullion could target $1,900 per ounce this week.

Meanwhile, the University of Michigan’s preliminary consumer sentiment index fell to its lowest reading since October 2011. It followed reports that consumer prices posted their highest annual increase in 40 years. The survey’s current economic condition index slipped to its lowest since August 2011, and consumer expectations dropped to their lowest since November 2011. Experts do not expect the data to affect spending, but it might influence the Federal Reserve’s rate hike plan.

On the technical front, DailyFX strategist Daniel McCarthy noted that gold resumed trading above all simple moving averages (SMA). He believes that requirements for a bullish triple moving average (TMA) will be fulfilled. It requires the short-term SMA to be higher than the medium-term and long-term SMAs. And the 10-day SMA has just crossed the 21-day SMA.

McCarthy also mentioned the declining U.S. real yields, which is positive for gold prices. It favors the bullion since the gold alternatives have become less attractive. And San Francisco Federal Reserve Bank President Mary Daly’s dovish remarks on the rate hikes pushed yields further down. Her comments, though, were in stark contrast to those made by James Bullard. The St. Louis Fed president called for 100-basis-point hikes within the next three FOMC meetings.