Author: Mr. Amar – Technical Analyst

Gold prices rallied overnight to the highest level traded since November 2021. The yellow metal has held up fairly well in recent weeks relative to stocks and other high-beta assets. The hawkish shift in the outlook on interest rates has caused fundamental repricing through most asset classes. The main fundamental driver of that repricing has been the steep rise in Treasury yields. Those higher yields serve as a headwind to most asset classes, particularly non-interest-bearing instruments.

Meanwhile, geopolitical tensions are front and center as Russia’s troop buildup along with the Ukrainian border spurs worries about a potential invasion. Additionally, US President Biden directly warned Russia not to invade Ukraine and if they do, they’ll lose access to the US dollar. Further, comments favoring Federal Reserve (Fed) Chairman Jerome Powell’s push to recalibrate the support also raised concerns over faster rate hikes and balance sheet normalization, which in turn exerted additional downside pressure on the gold prices.

Technically, XAU/USD broke above a key level of resistance overnight before upward momentum eased during the Tokyo session. If so, a pullback to the just-breached resistance level, at $1832, may act as support and give bulls a strong ground for their next push. The November high at $1877 is a likely target. Should the gold buyers keep overpower past $1850, the late 2021 peak of $1877 will be the last line of defense for sellers, a break of which will throw cards for a rally towards the $1900 and beyond.