Gold Price Analysis: XAU/USD trading with negative bias after hitting lowest since mid-February above $1850

• Gold is trading with a negative bias, even after rebounding to near $1860 from multi-month lows near $1850.
• XAU/USD bears continue to eye a test of the 200DMA in the mid-$1830s as the US dollar/US yields remain buoyant.
• The main focus of the week will be Wednesday’s Fed meeting.

Spot gold (XAU/USD) prices hit their lowest levels since mid-February on Tuesday just above the $1850 mark. While support in this area is holding up for now and XAU/USD has since rebounded to closer to $1860, that still leaves it trading with a slightly negative bias on the day. Gold bears are still eyeing a potential test of the 200-Day Moving Average in the mid-$1830s in the near future.

Gold prices are suffering as a result of the negative backdrop of buoyant global yields and a still very robust US dollar as markets brace for more central bank tightening this week (primarily from the Fed) after the RBA’s larger than expected rate hike during Tuesday’s Asia Pacific session. The Fed is expected to lift interest rates by 50 bps on Wednesday, signal rates hitting roughly 2.5% by the year’s end and announce quantitative tightening plans.

Ahead of the Fed’s policy announcement, the US 10-year yield, though a few bps lower on the day, continues to flirt with the 3.0% level, its highest point since late 2018. The Dollar Index (DXY), meanwhile, continues to eye a test of last week’s multi-year highs near the 104.00 level as is consolidates just above 103.50. Higher yields represent a higher “opportunity cost” of holding non-yielding assets such as precious metals.

Meanwhile, a stronger US dollar makes USD-denominated commodities (such as XAU/USD) more expensive for purchase by the holders of international currency. If the 10-year yield was to break definitively above 3.0% and the DXY test/break above 104.00 once again, that could coincide with a break below $1850 in gold and a test of the 200DMA.