Gold – Drifts lower pressured by higher yields

• Higher yields push gold lower
• Could the US CPI be a game-changer?
• A break of June lows could be very bearish

The second half of the summer hasn’t been kind to gold so far, with the yellow metal coming close to $2,000 once more before plunging back toward $1,900 where it spent most of late June and early July.

Higher yields, particularly in the US, and a stronger dollar have been primarily responsible for this but there’s probably also an element of uncertainty in the economic data that’s making traders a little nervous.

We’ve finally reached the end of the tightening cycles – or extremely close to it – and now we’re left wondering how long we’ll be stuck here.

We’ve seen some significant improvement in some areas but not yet enough to convince policymakers that the case for rate hikes has passed, let alone that there is any case for easing again early next year.

That narrative may change if we see some further improvement in the data, starting with the US CPI tomorrow, but for now, that nervousness is creeping back in.

Was the early July rally just a corrective move?

If the price moves below the June lows, around $1,893, that could be a very bearish signal for a couple of reasons.

XAUUSD Daily

Source – OANDA on Trading View

For one, it would make the rotation on 20 July all the more significant and would confirm the rally that preceded it as a retracement, indicating the broader decline may still be in play.

What’s more, a move below the 200/233-day simple moving average band – the lower end of which falls around $1,860 – could be viewed as another very bearish development.

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