Gold Price Analysis: XAU/USD sharply lower amid ongoing US yield rally, but supported above $1850s for now

• Gold is sharply lower on Monday and trading near $1860, as US yields rally on further hawkish Fed pricing.
• XAU/USD is for now holding above last week’s $1850 lows amid safe-haven demand as global equities crater.

Spot gold (XAU/USD) prices were last trading lower by about $25 or around 1.3% near the $1860 per troy ounce mark on Monday, as a continued push higher in US bond yields weighed heavily on precious metals. The US 10-year yield hit 3.20% for the first time since December 2018 earlier on Monday, taking its gains since last week’s Fed meeting to over 25 bps at the time. At current levels around 3.17%, the 10-year yield is up a staggering 1.3% since the end of February.

For now, XAU/USD is holding up above last week’s lows just above $1850. The steep recent sell-off in global equities on central bank tightening, inflation and global growth fears, that has extended on Monday, seems to be offering safe-haven gold a modicum of support. The buck has been struggling to break higher at the start of the week, despite higher yields and weakness in risk assets.

Should the DXY break convincingly to the north of the 104.00 level and yields retain their current bid, it seems very likely XAU/USD would break lower. The first area of support to the downside beyond $1850 mark to note is the 200-Day Moving Average in the mid-$1830s. A break below here could open the door to a run lower to the 2022 lows around $1780.

Gold traders will need to keep an eye on a barrage of commentary from Fed policymakers this week that could help further shape expectations for US monetary policy. But the main event of the week will be the release of US Consumer Price Inflation (CPI) data on Wednesday. Sky-high inflation has been the key motivator of the Fed’s recent hawkish shift. If the recent rally in US yields and the US dollar is to ease, traders will want to see evidence of an easing of inflationary pressures.