Gold Slips to 5-Week Low as Bond Yields Boost Dollar

Gold prices have resumed a downward slide, as the base metal has recorded losses in four of the past five sessions. In Wednesday’s North American trade, the spot price for an ounce of gold is $1322.33, down 0.61% on the day. In the US, it was a quiet day, with no major releases. Thursday promises to be busier, as the US releases durable goods orders and unemployment claims.

The greenback rally has sent its rivals to lower ground, with gold also heading lower. Gold has fallen 2.1% since April 16, and earlier on Wednesday dropped to $1318 an ounce, its lowest level since March 19. Much of the dollar rally can be attributed to rising yields on US bonds, which have hit 4-year highs this week. On Wednesday, 10-year US Treasury notes climbed to 3.015%, and 2-year bonds have increased to 2.504 percent. With inflation appearing to be on the rise, there are stronger expectations that the Federal Reserve will raise rates four times in 2018, which is good news for the US dollar. With oil pushing above $70 a barrel, there are concerns that inflation will rise, which has pushed bond prices lower and yields upwards. Gold has also lost ground due to a recent reduction in geopolitical risk, with an easing of tensions between North and South Korea, and a lull in the conflict in Syria.

The trade battle between China and the US has become a geopolitical hotspot, dominating the headlines and shaken global markets. After a series of tit-for-tat tariffs between the economic giants, there has been widespread concern that these moves could lead to a trade war which would slow down Chinese growth and trigger a global recession. However, US Treasury Secretary Steven Mnuchin sought to lower the rhetoric on the weekend, saying that he was considering a trip to China, adding he was “cautiously optimistic” that the two sides could resolve the trade dispute. If relations between the US and China improve, gold prices could continue to head lower.

XAU/USD Fundamentals

 Wednesday (April 25)

  • 10:30 US Crude Oil Inventories. Estimate -1.6M. Actual 2.2M

Thursday (April 26)

  • 8:30 US Core Durable Goods Orders. Estimate 0.5%
  • 8:30 US Durable Goods Orders. Estimate 1.6%
  • 8:30 US Unemployment Claims. Estimate 230K

*All release times are DST

*Key events are in bold

XAU/USD for Wednesday, April 25, 2018

XAU/USD April 25 at 13:50 DST

Open: 1330.47 High: 1332.13 Low: 1318.86 Close: 1322.83

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD edged lower in the Asian session. The pair posted stronger losses in European trade and is steady in the North American session
  • 1307 is providing support
  • 1337 is the next resistance line
  • Current range: 1307 to 1337

Further levels in both directions:

  • Below: 1307, 1285 and 1260
  • Above: 1337, 1375, 1416 and 1433

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Wednesday session. Currently, long positions have a majority (57%), indicative of trader bias towards XAU/USD reversing directions and moving upwards.  

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.