Gold Weekly Price Forecast: XAU Caught Between Treasury Yields And USD

brass metal frame

GOLD PRICE FORECAST: NEUTRAL

  • Gold has recovered slightly after falling to its lowest level since June in early March
  • Gains have slowed, however, as yields have cooled and US Dollar strength has emerged

GOLD WEEKLY PRICE FORECAST: XAU CAUGHT BETWEEN TREASURY YIELDS AND USD

Gold has suffered from directionless price action in the last two weeks after mounting a recovery rally from the 1675 area earlier this March. Since the Federal Reserve reiterated its accommodative policy path at the March Fed meeting, it can be argued little has changed in the fundamental landscape over the period. With that in mind, the precious yellow metal is caught between fluctuating Treasury yields and US Dollar price trends.

GOLD PRICE & US 10-YEAR TREASURY YIELD (JANUARY 2017 – MARCH 2021)

gold vs 10-year yield

Chart created in TradingView

Last week, US Treasury yields saw their ascent slow giving brief respite to gold as investors were previously shying away from gold exposure amid rising yields. That said, weakness in US Treasurys was combated by considerable strength in the US Dollar which worked to curb gains for the Dollar-denominated commodity.

GOLD PRICE & US DOLLAR BASKET (DXY) (JANUARY 2017 – MARCH 2021)

gold vs dxy

Chart created in TradingView

Evidently, a cooldown in US Treasury yields is not enough to spark gold gains if Dollar strength exists simultaneously – evidenced by their consistent negative correlation. Due to the relationship between the three markets, the contradicting moves in Treasurys and the Greenback translate to a lack of direction for gold which has stymied the recovery rally.

GOLD (XAU/USD) PRICE CHART: DAILY TIME FRAME (MARCH 2020 - MARCH 2021)

xauusd gold

With gold seemingly at the mercy of other markets, gold traders can look to US Dollar analysis for further insight. As it stands, the Greenback is on the verge of, or has already endeavored on, a number of bullish breakouts that could suggest further Dollar strength is ahead which might leave gold grasping for support. 

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