Gold trades below $1820

Gold reversed from two-day highs and is back near weekly lows as the US dollar surges after comments by key central bankers in their speeches before the ECB Forum from Portugal.

Gold prices dropped sharply during the US trading session, erasing daily gains. XAU/USD peaked at $1833, the highest level in two days and then turned lower, falling to $1814, slightly above the daily low of $1811.

The reversal took place amid a rally of the US dollar. The Dollar Index jumped toward 105.00, the highest level in a week. It is rising for the second day in a row as market concerns remain in place.

Treasury yields eased on Wednesday even as central bankers offered a hawkish tone from Portugal where the European Central Bank is having its annual meeting.

Fed Chair Powell warned about the risk to the economy from higher interest rates; however made it clear the biggest risk is losing price stability. ECB President Lagarde said they will consider the “anti-fragmentation” tool at the July meeting.

The bounce from $1811 weakened before reaching at $1835, a short-term downtrend line. A break above the mentioned level should open the doors to more gains, targeting initially $1845 and then levels above $1850.

While under $1835 the outlook is biased to the downside, with rising risks of more losses below the 20-Simple Moving Average in four-hour charts (currently at $1825).

The Gold Index is testing $1815 and below attention would turn to $1811 (June 29 low) and then to $1804 (June 14 low), the last defense of $1800.