The first argument is that the financial system will stiffen globally in the future since it is projected that the Fed will begin raising interest rates in early 2023 and that the BoE and the Bank of Canada will likely raise interest rates even earlier. The European Central Bank, the BoJ, the Reserve Bank of Australia, the Riksbank, and the Swiss National Bank are all expected to raise interest rates later than the other monetary authorities, although the trend is still toward tightening rather than loosening. Only in China has the banking system taken incremental moves to ease policy to boost the economy. Monetary tightening policy is generally detrimental to the price of gold, in part since government bond yields have a propensity to rise as a result of tightening fiscal policy.
The real yields on 2-year US Treasury bonds are expected to rise. There would be two variables at work in this situation. For starters, it is projected that the yield on 2-year US Treasury bonds will climb slightly more than what the markets are now anticipating. Furthermore, inflationary pressures are expected to subside. This would result in higher 2-year US real yields, which would harm gold prices in the future.
Review Of The Technicalities
XAU/USD CHART. Source: Tradingview.com
Focusing on the analytical overview, the XAU/USD has been swinging inside a well-known price action since the start of this week, which is encouraging. As a result, it is wise to hold off on putting bold bets until there has been a significant break in either direction. As a result, any following move up may face opposition around the $1,770 zone, which corresponds to the one-and-a-half-week highs reached on Monday. It is expected that bulls will aim for the $1,800 round sum after clearing the $1,774-75 zone and the $1,783-84 region. The latter corresponds with the extremely crucial 200-day simple moving average (SMA), and it should serve as a critical decisive stage for short-term investors.
On the other hand, the $1,750-48 zone, which corresponds to the bottom boundary of the weekly price action, appears to have arisen as instant and solid support at this point. After a decisive breach below, the market will be set up for a decline towards the $1,729 interim support area, which is inching closer to September monthly swing downtrend in the $1,722-21 region. If there is some follow-through selling, gold will become susceptible to accelerating its downward trend to breaching the $1,700 level before ultimately plunging to multi-month lows in the $1,687-86 range, which was reached on August 9.