Gold Loses Recent Gains As The U.S. Dollar And Treasury Yield Recover

On Wednesday, gold rose to near a two-week peak early in the session. But the bullion later fell by around 0.2% as the U.S. dollar and Treasury yields firmed. But the yellow metal remains supported by the uncertainty over inflation trajectory and the downbeat sentiment in riskier assets.

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Spot gold is currently trading at $1,858.74 per ounce as of 0701GMT.

Stephen Innes of SPI Asset Management noted that the market struggles to assess the inflation path. And that uncertainty supports gold prices. He argued that the September hike rate expectations would be pivotal for gold prices. Thus, gold traders and investors will monitor the minutes of FOMC meetings beyond June and July to get more clues about policy changes. Innes also mentioned that some investors noticed a softer tone in the Federal Reserve’s recent statements.

On Tuesday, Atlanta Federal Reserve Bank President Raphael Bostic warned policymakers that headlong rate hikes could create significant economic dislocation. He supports efforts to bring down inflation but wants to proceed with intention and without recklessness. Bostic also suggested no further rate hike at the FOMC’s September meeting to better assess the impact of tighter in the economy.

In the eurozone, inflation reached a record-high of 7.4% in April. It prompted the European Central Bank (ECB) to follow global peers in raising interest rates. Last week, De Nederlandsche Bank President Klaas Knot proposed rate hike increments of 20- or 50-basis-points. But ECB President Christine Lagarde insisted that the ECB would move gradually because inflation was driven by supply rather than the demand side of the economy.

On the technical front, DailyFX strategist Daniel Dubrovsky predicted a further increase in gold prices. He cited the IG Client Sentiment, which showed that around 84% of retail traders are net-long gold. It indicates that the price trend might reverse higher soon. In addition, gold prices breached the 20-day Simple Moving Average, which hints at further gains.

FXStreet analyst Anil Panchal disagreed and suggested that gold prices are likely to bear the burden of dollar recovery. He explained that the pullback of the Relative Strength Index and the failure of gold to cross the 38.2% Fibonacci retracement indicates a further decline. Also, a confluence of the 200-SMA and 50% Fibo will challenge the bullion’s further upside.

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