Gold futures lower after Friday’s wild surge

Gold prices finished Monday with a shy loss, following a wild soaring in the final session of last week that saw prices for the precious metal briefly dip to fresh lows. Gold was not stable to begin the week, as the bears have been able to pull the rope to their side. One of the biggest questions which are very much influencing the price of the precious metal is if the Fed is going to slow down the pace of interest rate hikes.

Markets expect the US central bank to increase interest rates by 75 basis points during their November meeting. The next rate hike will push the US Dollar index higher as usual. Consequently, the strength of the US Dollar index is forcing pressure on gold price.

Gold is under pressure on Monday as it pulls back from the highs reached at the start of the day around $1,670, 0.5% higher than the current spot price of $1,650 per ounce at the time of writing. The US dollar has firmed for its safe haven qualities but is teetering with key trendline support that is illustrated below, a break of which could help to boost the precious metal.

The ICE Dollar Index traded modestly higher in Monday dealings, while Treasury yields were mixed. Each is impacting precious metals prices, along with shifting expectations about where the Fed funds target rate will be at the end of the year, analysts said.

Analysts have observed an inverse correlation between gold price and US 10-year bond yield since the COVID pandemic began. This inverse correlation could continue in 2023 as well.

The 10-year bond yields are expected to form a long-term top anytime from now through Valentine’s Day in 2023. Gold prices have also fallen less than rise in the US Dollar index and this is a positive sign for 2023.

Traders are now betting on a 50-basis point hike by the Fed in December. This bet is giving some gold analysts hope that the bottom might have been made obvious.