Gold Moves Higher Following Powell’s Testimony.

Gold is trading between two levels of resistance and support, namely around $1,810 on the downside and $1,875 on the upside.

At $1,840, the price of gold is a little lower than the highs but its remains 0.4% higher on the day. The price has travelled between a low of $1,823.45 and a high of $1,847.93 so far.

Threats by US Treasury yields and the US dollar have bolstered the appeal of gold amid growing recession concerns but such threats have started to give up early gains as investors move into US stocks and risk assets despite higher interest rates.

Bond yields fell ahead of testimony by Federal Reserve chair Jerome Powell to Congress and his delivery was taken as less hawkish. The softer yields are bullish for gold since the precious metal offers no interest. The yield on the US 10-year note was last seen down 3.8% to 3.156%, falling from a high of 3.283% to a low of 3.124%.

US stock markets have reversed course from early losses and moved higher, with the Dow Jones up 0.6% and the S&P 500 index last seen up 0.75%. The NASDAQ is higher by 0.9%. The US dollar edged down 0.3% as measured by the DXY index, falling from a high of 104.95 to a low of 103.858.

Fed Chair Jerome Powell said the US central bank is “strongly committed” to bringing down inflation, but there was a sigh of relief that Powell was not any more hawkish than he was when the Fed raised its benchmark overnight interest rate by three-quarters of a percentage point, its biggest hike since 1994.

While Powell said that the Fed was strongly committed to returning inflation to its 2% objective, he did not state that this commitment is unconditional, as the Monetary Policy Report did last week. Additionally, during the Q&A he tried to convince the audience that a soft landing is possible, but that price stability is his priority right now. However, recession fears are mounting.

This is offering support to gold bugs looking for a peak in market pricing for Fed hikes. Markets are increasingly discounting a recession looming on the horizon, which historically has led a pivot in Fed policy. However, this hiking cycle differs from recent historical analogs as the Fed’s ability to control inflation is limited, given that the supply-side is disrupted.

In turn, gold bugs sniffing out a potential stagflationary outcome associated with lower growth but lingering inflation should also consider that central banks, facing a credibility crisis, could also continue to raise rates for longer than they otherwise would. In this scenario, pricing for a Fed pivot would be less associated with recession odds than in prior episodes.

The nearest demand area, or order block, is located at around $1,826. There is a price imbalance between there and the current spot price that could be mitigated in the near term, drawing the market towards the demand zone. If the bulls commit, then there will be a case for a move higher towards areas of imbalance above on the way towards $1,875.