Oct 24, 2022 6:30 AM ET
By:AnalysisWatch
Gold finds itself with a fresh bid near the $1,670 region, i.e., above the one-week highs set earlier on Monday, and extending its intraday decline during the first half of the European session.
XAU/USD falls back below the $1,650 level and erodes part of Friday's good rebound from near the yearly low.
The US dollar recovers solidly and rebounds quickly from two-week lows, which, in turn, is seen as a key factor putting downward pressure on dollar-denominated gold.
Despite reports that some Fed officials are signaling increased discomfort with oversized rate hikes, investors seem convinced that the US central bank will maintain its aggressive policy tightening cycle.
This, in turn, continues to support elevated US Treasury yields and helps the dollar regain positive traction.
In addition, other major central banks—the European Central Bank and the Bank of England—are also expected to undertake a large rate hike at upcoming policy meetings.
This turns out to be another factor driving demand away from the non-yielding yellow metal. In addition, the slight recovery in risk sentiment, reflected in the positive tone of equity markets, is also weighing on safe-haven gold. That said, growing recession fears could help limit the metal's losses.
Investors remain concerned about economic headwinds stemming from rapidly rising borrowing costs and the prolonged conflict between Russia and Ukraine. All of this, along with China's strict zero-VOC policy, has fueled concerns about a deeper global economic recession.
This mixed backdrop warrants some caution before placing aggressive bearish bets on gold and positioning for a further decline. Traders are looking ahead to US PMI data due later in the North American session.