As the USD continues to be in high demand, the bullion remains under pressure. That seems to be the case on Friday as the dollar index returned to its cycle highs, pushing the shiny metal down 1% toward the important 1,800 USD mark.
Fed fights inflation
“If the economy performs about as expected … it would be appropriate for there to be additional 50-basis point increases at the next two meetings,” said Powell in an interview with the Marketplace public radio program on Thursday.
However, he noted that the Fed was not “actively considering” a greater 75-basis-point hike, which has encouraged some traders to reduce their long dollar bets.
Meanwhile, 10-year breakevens fell over 20 basis points to under 2.70%, the lowest level since early March, indicating a drop in demand for inflation protection. This is bad news for gold, which is typically considered an inflation hedge.
Below 200-day average
Technically, the metal confirmed a new bearish breach below the crucial 200-day MA on Thursday. As a result, any following rallies may be viewed as a selling opportunity.
Therefore, as long as the bullion trades below the 200-day average at 1,835 USD (the purple line), the immediate outlook seems bearish, targeting the psychological level of 1,800 USD. Another demand zone is expected to be at January lows at 1,780 USD.
On the other hand, the selling pressure might ease if the metal jumps above 1,835 USD, with a possible follow-through toward January highs at 1,855 USD.