Gold bugs have been riding the slipstream left by the lower US dollar and Treasury yields, though Friday’s price action is taking some of the shine off bullion.
Still, gold prices are on the cusp of posting a third consecutive weekly gain, fuelled by persisting fears over a possible US recession.
Ultimately, gold’s outlook remains contingent on whether the Fed can halt runaway consumer prices without triggering a recession.
An ultra-aggressive Fed that sends Treasury yields climbing higher, while allaying fears of a US recession, should cap gold’s upside, especially if 10-year US Treasury yields resurface above the psychologically-important 3% over the near-term.
If markets remain fixated on the possibility of a looming recession, November’s $1877 peak serves as the next area of interest for gold bulls, having found recent support at its 200-day simple moving average.
Gold may also edge closer towards $1900 if the May US nonfarm payrolls data show softening hiring momentum in the labour market that takes the edge of the Fed’s ultra-hawkish stance.