Gold Remains Stuck Between MAs

Gold has been bullish since November last year, as the sentiment turned positive and the USD started declining. In early May Gold tested the all-time highs, but buyers failed and since then we have seen the price retreat lower. Although the 100 SMA (green) has been holding as support in the daily chart. This moving average has been supporting the price at the bottom, while the 50 SMA (yellow) has turned into resistance.

On Wednesday, Gold experienced a decline of approximately $30 from its recent high which was triggered by a surprise interest rate hike by the Bank of Canada (BoC), having a ripple effect across various markets. The decision by the Bank of Canada also had an impact on US Treasury Yields, which saw a significant upward movement as expectations of higher rates for a longer period grew. If the likelihood of further rate increases by the Fed persists, it is expected to provide support for US yields, which could in turn hinder any significant upward movement in Gold prices.

Following the Reserve Bank of Australia (RBA), the BoC raised rates by 25 basis points, and market swaps are now fully pricing in the probability of a similar rate hike by the US Federal Reserve (Fed) in July. However, the probability of a rate hike at the upcoming Fed meeting also increased, though it remains below 40%. Yesterday the unemployment claims posted a jump for last week, which was the highest since October 2021, indicating that the labour market might be feeling the [pressure from rate hikes. That sent rate hike odds lower together with the USD, while Gold bounced off the 100 SMA again.

So, we can say that the GOLD price action has been erratic recently. Prior to the drop observed yesterday, there were indications of a potential new high, with the focus on reaching the $1,990 level and the 50-day moving average. The price of Gold found support once again at the 100-day moving average overnight and has continued to rise during the European session, trading just below the $1,950 level.