Gold Tumbles Amid Surging U.S. Yields

(May 2nd, 2022 - Alex BoltyanCommodities)

Gold slumped below $1,900 to 11-week lows on Monday as U.S. Treasury yields and the dollar pushed higher, dragging down the yellow metal price. With the Federal Reserve decision around the corner, the yield on the United States 10-Year note reached a fresh cycle high at 3.01%, while the yield on the United States 30-Year bond peaked at 3.049%.

The Fed is expected to increase its primary rate by 50 basis points on Wednesday, May 4, when it concludes its two-day meeting. Even though this decision is mainly priced, investors will be paying attention to Jerome Powell's rhetoric and details on how the central bank plans to reduce its balance sheet.

The surge in yields pushed the XAU/USD price through the 100-day SMA and to its lowest level since February in the $1,855 an ounce area. According to technical indicators in the daily chart, the short-term technical perspective remains bearish for the yellow metal. Both the RSI and the MACD are in sellers’ territory while increasing bearish pressure.

At the same time, the price trades below the 20- and the 100-day SMAs while it moves toward the critical support at the $1,835 zone, where the 200-day SMA converges with an ascendant trendline coming from August 2021 lows.  A break below this level could turn the longer-term picture to the downside and pave the way for a test of the $1,800 area and even the January low at $1,780 an ounce.