The price of gold takes out the November low ($1765) as it extends the series of lower highs and low from earlier this week, and the weakness in the precious metal may continue to coincide with the rise in longer-dated Treasury yields even as the spread between 2-year and 10-year maturities has widened substantially over the last few weeks.
At the same time, a ‘death cross’ formation has emerged amid the flattening slopes in the 50 and 200 Day moving averages, and the decline from the record high ($2075) appears to be a shift in market behavior rather than an exhaustion in the broader trend as the low interest rate environment no longer provides a backstop for bullion.
In turn, the price of gold now faces a greater risk of giving back the advance from the June 2020 low ($1671) even though the Federal Reserve stays on track to “increase our holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month,” and the precious metal may remain under pressure ahead of the next Federal Open Market Committee (FOMC) interest rate decision on March 17 as the central bank appears to be in no rush to alter the path for monetary policy.
With that said, a further rise in longer-dated US Treasury yields may undermine the recent rebound in the price of gold as bullion no longer exhibits the bullish price action from 2020, and the Relative Strength Index (RSI) may indicate a further decline in gold prices if the oscillator crosses below 30 and pushes into oversold territory.
