Earlier this week, gold was pulling decisively higher and had $2000 within its grasp. However, since then, the market has retraced once more. The retreat leaves the gold price once more at a key crossroads. For now, the performance of gold remains commendably solid despite the fundamental backdrop. Is this about to change though? 

  • The reaction of 10-year real US bond yield to 0% could be crucial for the outlook on gold. Peak-hawkishness could be the key.
  • Gold has continued to trend higher in recent months despite negative fundamentals. The ongoing Ukraine war is supportive.
  • The technical outlook on Gold suggests that key support is holding, for now.

Gold is solid despite the fundamentals 

The performance of gold has been remarkable in recent weeks. Facing up against a consistently strong US dollar and surging real bond yields, gold has remained strong. These are two factors that would normally be negative for gold. Gold is negatively impacted by rising interest rates. Also being priced in dollars, a stronger USD is also negative for gold.

That is not to say that gold has not been impacted by the sharp rise in real yields. The run to $2070 was halted as real yields began to surge higher in early March. However, once the initial shock of this move, gold has built from support to around $1890/$1915. 

gold VS yields

However, the safe-haven flow that gold is finding from the Ukraine war seems to be a key factor in developing the support for gold despite rising real yields and the stronger USD. Over the past month, amid all the fluctuations of performance across the metals and energy commodities, gold is the best performing.

Commodities performance in the past month

The 10-year real yield moving above 0% could be a watershed moment for gold

Gold fell sharply as the 10-year “real” yield ( inflation-adjusted long-term interest rate) briefly went into positive territory earlier this week. The question is whether this rise in real yields will continue. Interest rate futures markets are already pricing for another 2.00% of interest rate tightening this year (i.e. a total of eight +25 basis points of moves), to take the Fed funds rate to 2.5%. Another +50bps is priced for 2023. 

This is fully priced in now. The question is whether the Fed will continue to guide for even higher rates beyond there.  

Until now, gold has held up in the face of rising yields. However, if the real yield continues to move above zero, that is when it could become a bigger problem for gold. Net positive interest rates start to be a bigger opportunity cost for gold. So, how US bond yields react to FOMC speakers and the FOMC meeting on the 4th of May could be a key driver in the outlook for gold.

For now, the continued war in Ukraine is allowing Gold a safe-haven flow. This is ensuring support. If gold can reach the peak-hawkishness of the Fed with this support of around $1890/$1915 intact, then the continuation of the Ukraine war could thrust gold higher again.

Technical support is intact for gold

We have seen gold (MT5 code: XAUUSD) pulling back into an important area of support in recent days. The support of an 11-week uptrend sits around $1932 which is in the middle of a support band between $1928/$1940. There is also the support from the rising 89 day moving average (a long-term trend indicator) at $1923, an indicator that has flanked the uptrend in recent weeks.

Momentum has also unwound back towards neutral, with the Relative Strength Index again back around 50. This is the area around which buying pressure resumed during March. It seems that gold has reached a key crossroads both technically as well as fundamentally.


We will be watching these support levels closely. A close below $1915 has not been seen since the end of February (despite a couple of intraday spikes to $1890/$1900). A close below $1915 would be a signal to suggest gold is falling over.   

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorized to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.