Gold price declines below $1,920 as USD gathers strength

• Gold price declined to below $1,920 on Thursday.
• 10-year US Treasury bond yield climbed to fresh multi-year highs above 4.5%.

Gold price turned south in the second half of the day and declined to a fresh six-day low below $1,920. At the time of press, XAU/USD was down 0.6% on the day at $1,918.50.

On Wednesday, XAU/USD climbed toward $1,950 before making a sharp U-turn in the late American session. Although the Federal Reserve left the policy rate unchanged at 5.25%-5.5% as expected after the September policy meeting, hawkish revisions to the Summary of Economic Projections triggered a rally in US yields and weighed heavily on the pair.

The dot plot confirmed that the US central bank intends to lift the policy rate by another 25 basis points in 2023 and showed that policymakers expect a total of 50 bps rate cut in 2024, compared to 100 bps in June's dot plot. 

Following a quiet European session, the benchmark 10-year US Treasury bond yield regained its traction and climbed above 4.5% for the first time since November 2007, forcing XAU/USD to stay on the back foot.

Meanwhile, the Bank of England went against the market expectation of a 25 bps rate hike and held its policy rate steady at 5.25%. The sharp decline seen in GBP/USD after this decision highlighted that the USD managed to capture capital outflows out of Pound Sterling. In turn, the USD gathered additional strength and caused XAU/USD to decline further.

Technical levels to consider