Gold Eases From Near $1,860 Despite Weaker Treasury Bond Yields

On Friday, Gold price yielded a daily closing above the bearish 21-Daily Moving Average (DMA) at $1,844. Therefore, Gold bulls flexed their muscles early Monday before changing course, following the 14-day Relative Strength Index (RSI) downtick.

The momentum indicators are now threatening the 50.00 level again, which could help extend the corrective decline in Gold price. If that materializes, the Gold price could retreat further to test the 21 DMA resistance-turned-support. A clear downside break of the latter will call for a test of Friday’s low at $1,835.

Alternatively, the Gold price rally could resume if buyers fight back control, prodding the mildly bullish 50 DMA resistance at $1,870. Ahead of that level, the $1,858-$1,860 supply zone could be a tough nut to crack for Gold optimists.

Fundamental Overview

Gold price is retreating from over two-week highs of $1,858 in the early European session. The gold price has stalled its upbeat momentum even as the United States Dollar (USD) resumes its decline amid a positive risk tone. This week’s focus remains on the US Federal Reserve (Fed) Chairman Jerome Powell’s testimony and the all-important US Nonfarm Payrolls data. 

It’s all about Federal Reserve expectations. Powell is due to testify on the semi-annual monetary policy report released on Friday, and markets are anticipating some hints on the policy outlook. Therefore, they are resorting to repositioning, gearing up for a significant market reaction to the Fed Chief’s testimony. The sustained pullback in the US Treasury bond yields can also not revive the Gold buyers.

Meanwhile, markets are pricing roughly a 30% probability of a 50 basis points (bps) rate hike in the March meeting. Friday’s US ISM Services PMI eased slightly to 55.1 in February. The critical US ISM Services Price Paid Index bettered expectations, coming in at 65.6 vs. 64.5 expected. Upbeat figures indicated elevated inflationary pressure, supporting the case for bigger Federal Reserve rate hikes

Despite the hawkish expectations, the US Dollar failed to capitalize on Friday, as the end-of-the-week flows came into play and weighed heavily on the greenback. As a result, Gold price rallied hard to hit the highest level in two weeks, above $1,850.

Ahead of the key event risks later in the week, Gold traders await the United States Factory Orders data later in the North American session for fresh trading impetus. Without top-tier US economic data, Gold prices will take cues from the broad market sentiment and the dynamics of the US Dollar alongside the Treasury bond yields.