FX.co ★ Currency-Exchange | XAU/USD, GOLD

Gold's luster dimmed considerably during the early European trading session on Thursday, plunging to a multi-day low near $2,370. This descent stemmed from a confluence of factors: rising yields on US Treasury bonds, which offered a more attractive alternative to non-interest-bearing gold, and a cooling of geopolitical tensions in the Middle East, lessening the demand for the traditional safe-haven asset. Fundamentals of the XAU/USD: A notable jump in US Treasury bond yields has been a primary catalyst for gold's recent decline. The yield on the US 10-year Treasury bond has increased by five basis points (bps) to 4.665%, presenting a significant headwind for gold. Concurrently, the US Dollar has shown strength, with the US Dollar Index (DXY) climbing to 104.20, an increase of 0.52%, currently trading at 104.00. These developments have created a less favorable environment for gold, traditionally seen as a hedge against economic uncertainty and inflation. Despite mixed economic signals from the US, the overall sentiment remains cautious. Last week's Gross Domestic Product (GDP) data fell short of expectations, while inflation indicators for the first quarter of 2024 pointed to a potential rise in prices. This inflationary trend may prompt the Federal Reserve to maintain its current policy stance longer than anticipated, which in turn could exert further pressure on gold prices. Daily Time Frame Technical Outlook: Technically, gold has broken down from a Bearish Flag formation on the daily chart, indicating a continuation of the recent downward trend. The Bearish Flag typically represents a consolidation phase following a sharp price correction, suggesting further declines may be on the horizon. The near-term outlook remains bearish as gold continues to trade below the 20-period Exponential Moving Average (EMA), currently positioned at $2,382.

Additionally, the Moving Average Convergence Divergence (MACD) indicator has begun printing bearish red histogram bars and has crossed below its signal line. This shift lends a negative tone to the gold chart, reinforcing the bearish sentiment. However, a confirmed break above the cluster of Moving Averages and the peak of wave B at $2,370 could signal a potential bullish reversal, possibly leading to a retest of the $2,400 highs.