Gold prices drop with surge in US treasury yields

The upward movement of the US dollar index contributed to the consecutive weekly declines in gold

By Raed Alkhedr | @raedalkhedr | 10 November 2023

  • Powell stated yesterday that the Federal Reserve needs to exert further effort to confront the price increases.

  • The price of an ounce of gold has dropped by over 1.66% this week.

Economic events impacting the movements of the US dollar and gold

Gold prices are poised to register a second-week decline, influenced by the rise in the US dollar index and Treasury bond yields, following statements made by the Chairman of the US Federal Reserve, Jerome Powell, which lean towards monetary tightening.

During his speech yesterday at the annual research conference of the International Monetary Fund, Powell emphasized the need for the Federal Reserve to exert more effort in addressing price increases. He stated that the Federal Reserve's Open Market Committee is committed to tightening monetary policy sufficiently to bring inflation down to the targeted level of 2%. However, he added that they are not confident they have achieved this target yet.

Powell mentioned, "My colleagues and I feel encouraged by the progress made in combating inflation, but we anticipate that the sustained process of reducing rates to 2% still has a long way to go." He further explained that if it becomes appropriate to tighten monetary policy further, they will not hesitate to do so. However, they will proceed cautiously to allow for a thorough evaluation of the data over several months, in order to avoid the risk of excessive interest rate hikes.

Regarding trading, the precious metal began the final session of the week with a slight decline, trading near the $1955 per ounce levels.

Key technical and pivotal levels influencing gold movements

After a decline, gold broke below the support level at $1963.00 and extended its downward movement to test the $1945.00 level. It managed to hold this as a support level and rebounded to the $1963.00 level, which has now become a resistance level. However, it failed to surpass this level.

There is a likelihood that gold will retreat and test the support level at $1945.00. If this support level is broken, the decline may extend further to the $1930.00 level, and breaking below that could contribute to additional downward movement to test the support level at $1910.00.

However, if gold successfully surpasses the resistance level at $1963.00, it could lead to further upward movement to test the $1970.00 levels. Surpassing those levels may extend the upward momentum to test the $1980.00 level.