Gold prices declined below $2,910 as US Treasury yields bounced back after the release of the February Nonfarm Payrolls report, which revealed firm job growth though missing estimates. Federal Reserve officials, including Chair Jerome Powell, reaffirmed that the central bank is not in a hurry to cut interest rates, maintaining monetary policy intact for the time being. Although inflation is still a worry, Powell made it clear that the journey to 2% inflation will be rough. Central banks such as China’s PBoC and Poland’s NBP also continue to build up their gold reserves, giving some support to the metal. But increasing US real yields and declining geopolitical tensions capped gold’s upside potential.
KEY LOOKOUTS
• A US Treasury yield rebound can continue to put pressure on gold prices, particularly with increasing real yields affecting gold’s attractiveness.
• The Fed’s reluctance to cut rates and Powell’s inflation remarks indicate that monetary policy will be tight, capping gold’s potential.
• Softening geopolitical tensions, especially in Ukraine and Russia negotiations, may dampen gold’s safe-haven demand and pressure prices.
• Continuous gold buying by large central banks such as China and Poland might offer price-supporting underlying fundamentals, counteracting general market pressure.
Prices in gold are being pressured downwards by US Treasury yields recovering and real yields increasing, which has been historically inversely affecting gold’s attractiveness. The Federal Reserve remains cautious about rate cuts, with Chairman Jerome Powell emphasizing that achieving 2% inflation will be a “bumpy” process, suggesting that interest rates will stay steady for the time being. Easing geopolitical tensions, particularly in Ukraine and the Middle East, have also reduced the safe-haven demand for gold. But central banks, such as China’s PBoC and Poland’s NBP, keep on taking gold, which should lend some underlying support to the precious metal in spite of overall market difficulties.
Gold prices are in pressure because US Treasury yields move higher and the Fed indicates a stable direction for interest rates. Although softening geopolitical tensions lower safe-haven demand, central bank buying, especially by China and Poland, lends some support to gold prices.
• Gold drops below $2,910 as US Treasury yields recover, exerting downward pressure on the metal.
• The February Nonfarm Payrolls report indicates consistent job growth, with 151K jobs created, though missing expectations.
• Federal Reserve officials, including Jerome Powell, indicate no hurry to reduce rates, stressing the necessity of a cautious approach to inflation.
• Powell reaffirms that the path to 2% inflation will be “bumpy,” maintaining monetary policy unchanged for the foreseeable future.
• Ukraine-Russia progress and US pressure on Hamas lower gold’s safe-haven demand, capping gains for the metal.
• The People’s Bank of China (PBoC) and Poland’s National Bank (NBP) have added gold reserves, with Poland purchasing the most since 2019.
• US real yields, especially on 10-year TIPS, rise, presenting a headwind to gold prices by lowering its relative attractiveness.
Gold prices are under pressure following increases in US Treasury yields and the Federal Reserve holding firm on interest rates. The latest US jobs report evidenced stable growth within the labor market with more joining the workforce while numbers fell short of expectations. Fed Chair Jerome Powell has indicated the central bank isn’t in any hurry to cut rates, given that the route to 2% inflation is uncertain and tough. This risk-averse policy stance has caused a more balanced economic outlook, taking away some of the gold’s attractiveness as a safe-haven asset.
XAU/USD DAILY PRICE CHART
CHART SOURCE: TradingView
Concurrently, relaxing geopolitical tensions, especially between Russia and Ukraine, have reduced the need for gold as a safe haven from world uncertainties. Improvement in ceasefire negotiations, coupled with a reduction in tensions in the Middle East, has also dampened gold’s presence in investors’ portfolios. In the meantime, central banks such as China’s People’s Bank of China and Poland’s National Bank are still buying gold, offering some sustained support to the metal. These central bank interventions, together with a strengthening global economic outlook, could assist in stabilizing gold prices in the face of wider market pressures.
TECHNICAL ANALYSIS
Gold prices are met with resistance at the $2,930 level, with the Relative Strength Index (RSI) indicating that there is still room for additional upside. The metal has, however, been unable to climb above this mark, signifying a period of consolidation. A fall below the $2,900 level might indicate further downside risk, with the next significant support levels being the February 28 low of $2,832 and the $2,800 level. On the other hand, a break above $2,930 could pave the way for a possible rally towards $2,950 and even $3,000, if momentum keeps accelerating. The market is still in a tight consolidation, with the price action of gold very closely related to movements in US Treasury yields and general market sentiment.
FORECAST
If gold can break above the current levels of resistance, notably the $2,930 level, prices could have the potential to rise further. A sustained rally could have gold pushing through the $2,950 level, with a possibility of reaching the all-time high of $2,954. If momentum keeps gaining and overall market conditions are supportive, like further central bank gold buying and geopolitical tensions, the $3,000 mark could come into view. Also, if inflation remains in play or the Fed is signaling to postpone rate cuts, gold might attract even more strength as a hedge against economic uncertainty.
On the negative side, if gold is unable to hold above the $2,900 level, further selling could be witnessed. A breakdown below this level would likely lead to a move towards the February 28 low of $2,832, followed by a possible test of the $2,800 support. Increasing real yields and a firmer US dollar can continue to depress gold, as it becomes less appealing relative to other assets. If the US economy continues to demonstrate strength, with the Fed still being aggressive on rates, gold may see further pressure, potentially pulling prices down in the near term.
