The bullion fell to fresh six-week lows on Tuesday, trading more than 1% lower ahead of the US session and seen at around 1,730 USD at the time of writing.
US yields have spiked higher recently, sending the 10-year yield to the psychological 1.5% level , but the whole yield curve has risen notably, indicating a broad selloff in the bond market. Rising yields are often bearish for precious metals but bullish for the greenback.
The dollar index has managed to capitalize on rising yields, at least so far, and it advanced to one-year highs today, trading above 93.50, the level last seen in early November 2020.
Fed becoming hawkish
Later in the session, the Federal Reserve Chair Jerome Powel will testify about the Coronavirus and CARES Act before the US Senate Committee on Banking, Housing, and Urban Affairs in Washington, DC. His remarks will be closely watched, as always. Considering the recent hawkish shift at the Fed today, the greenback might be further supported by his words. His testimony will continue tomorrow.
Earlier today, St. Louis Federal Reserve President James Bullard was out with some comments, saying that he sees two rate increases in 2022. The balance sheet should begin declining as soon as bond purchases end. Additionally, he thinks that the Fed policy normalization can move faster than following the 2007 to 2009 crisis, given the recovery speed.
Should the dollar continue moving higher, precious metals will most likely continue to decline. Silver is already on the verge of dropping below the essential 22 USD support, possibly opening space for a massive decline toward 18.50, where pre-COVID highs are located.
From other macro data, the US consumer confidence index for September is due today, along with the Richmond Fed manufacturing index. Unfortunately, both data rarely have any impact on gold or silver.
Bearish bias confirmed
As the bullion dropped to new swing lows, the bearish trend has been confirmed, especially if gold closes below 1,740 USD on the daily chart. Therefore, the first initial resistance is at 1,740 USD, followed by the selling area near 1,760 USD. Gold needs to climb above 1,760 USD for the immediate selling pressure to ease.
On the downside, the next target for bears is expected to be at 1,720 USD , and the medium-term target remains near August’s flash-crash lows at 1,680 USD. Additionally, as long as the bullion trades below the long-term uptrend line (the purple line on the chart), the long-term bull market is no longer valid. The medium and short-term timeframes also look bearish.
Gold daily chart, Source: Author´s analysis, tradingview.com
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