Gold Price Analysis: XAU/USD pressured to $1810 area as buck, US yields break higher post-hawkish Fed By Frank_Macro XAUUSD Gold
continued to decline, albeit at a steadier pace on Thursday. XAU/USD is currently trading close to the $1810 level, down a further 0.5% and now down about 2.3% from Tuesday’s highs above $1850. Gold was pressured by the DXY broking out to fresh 19-month highs above the 97.00 level, and as major US front-end yields broke out to fresh cycle highs as markets moved to price in more aggressive Fed hikes.
The Fed’s monetary policy statement, which indicated a likely March hike, and decision to hold rates was in line with expectations and didn’t move markets, but Fed Chair Jerome Powell’s press conference was deemed hawkish. Traders noted that Powell did not rule out a significantly faster pace of hikes than currently indicated in the dotplot and did not rule out a 50bps hike in March.
As a result, the implied yield on the three-month eurodollar future for December 2022 has jumped more than 15bps to close not far below 1.45% from previously under 1.30%. In other words, markets are now pricing five rate hikes in 2022. This shift in pricing seems inline with updatedcalls from major banks, including Nomura, who see a 50bps hike in March followed by a further four before the end of the year.
Recent breakouts in short-end yields and the DXY suggest a shift in momentum that may see further dollar and yield gains. This may continue to pressure spot gold prices; the safe-haven metal has been in a bullish uptrend in recent weeks and is now probing the lower bounds in the.
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