Spot gold (XAU/USD) prices are consolidating just under the $1840 mark on Thursday following Wednesday’s short-squeeze that saw prices surge from around $1810 and above resistance in the $1830 area. Many market participants had been calling for gold to move lower in recent weeks as hawkish Fed bets have been amped up and as real yields have moved higher. Some likely placed their stops just above recent highs in the $1830s and triggering of these may have contributed to the speed of the move through the $1830s and above $1840.
Any dip back to the $1830 area may be used by the gold bulls as an opportunity to reload on longs and perhaps target a move towards Q4 2021 highs in the $1870s. However, it is notable that with real yields substantially higher versus when spot gold was last at current levels near $1840, some may view the precious metal as not relatively more expensive. On November 22 when XAU/USD was last trading near $1840, 10-year TIPS yields were around -1.0%, versus current levels about 40bps higher.
Ahead of next week’s Fed meeting, which is expected to be a hawkish affair, analysts warn that spot gold remains at risk of experiencing selling pressure. A tense geopolitical backdrop, with Russia seemingly on the verge of a military incursion into Ukraine, may continue to offer the safe-haven metal some support, however.
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