Gold: Sidelined in Asia amid rise in US yields
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Gold: Sidelined in Asia amid rise in US yields

  • Gold’s recovery from two-week lows has stalled around $1,520 in Asia.
  • An uptick in the US bond yields is likely hurting the zero-yielding yellow metal.
  • The US 10-year yield is trading at the highest level since Aug. 22.

Gold is trading in a sideways manner around $1,520 in Asia, having dropped 2.14% on Thursday, the biggest single-day drop since Nov. 11, 2016.

The safe-haven metal is struggling to extend the recovery from the two-week low of $1,506 reached on Thursday as the US 10-year yield is on the rise.

As of writing, the benchmark yield is trading at 1.58%, representing a two basis point gain on the day. More importantly, the yield is currently hovering at the highest level since Aug. 23. A rise in bond yields makes the zero-yield yellow metal unattractive.

Further, the haven demand has weakened, courtesy of renewed US-China trade optimism and the resulting rally in the US stocks. The S&P 500 index to its highest level since the end of July Thursday.

Currently, the futures on the S&P 500 are reporting 0.27% gains. The US yields, therefore, could continue to rise during the day ahead, keeping the yellow metal under pressure.

The Dollar Index, gold’s biggest nemesis, is also showing signs of life, having created a long-tailed candle on Thursday. The index is currently trading at 98.44.

All-in-all, Gold risks falling back to the two-week low of $1,506 hit yesterday and could extend the decline to $1,500.

Technical charts are biased bearish

Thursday’s 2.14% drop validated the bearish divergence of the relative strength index. The moving average convergence divergence histogram is also reporting bearish conditions with a below-zero print. Further, the 5- and 10-day moving averages have produced a bearish crossover.

So, a drop to $1,492 (Aug. 22 low) could be in the offing in the short-term.

Technical levels


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