Gold drops back towards 3.5-months lows amid higher Treasury yields

• Better risk sentiment on upbeat China data, higher Treasury yields keep the recovery limited.
• Technical set up continues to remain in favor of the bears.

Gold (futures on Comex) faded the Asian bounce and dropped back towards the three-and-a-half month lows reached at 1275.55 in the US last session after the US dollar rallied across the board in tandem with the US stocks and Treasury yields amid upbeat US earnings reports.

The yellow metal attempted a tepid bounce earlier today following upbeat economic releases out of China, the world’s biggest gold consumer. Stronger Chinese data reduced the demand for the US currency amid risk-on and helped the gold recovery.

However, the recovery faltered near 1282 levels in the European session, as the bears regained control amid a rally in Treasury yields across the curve, especially with the 10-year yields clocking monthly tops while the European stocks and the US equity futures also kept the buoyant tone intact.

Further, the technical set up also continues to back the ongoing bearish bias, “as the yellow metal confirmed a descending triangle breakdown with a close at $1,276 yesterday. The breakdown has reinforced the bearish view put forward by the lower highs pattern and the downward sloping 10-day moving average. As a result, gold appears on track to test support at $1,262 (trendline connecting August and November lows),” Omkar Godbole, FXStreet’s Analyst explains.

Gold Technical Levels