Gold Prices Retreat Amid Risk Aversion Sentiment and Falling U.S. Yields

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Gold prices retreated around 0.90% in the mid-session of North America on Tuesday, amid a surge in risk aversion despite the decline in U.S. Treasury yields. The latest batch of U.S. economic data shows that the economy is slowing down, justifying lower interest rates. Despite this, XAU/USD trades with losses and operates at $2,328.

The golden metal has fallen below $2,350 per troy ounce as commodities generally tumble. Oil prices were under heavy pressure earlier amid fears that the global economy could grow at a slower pace, which could affect crude demand.

U.S. Treasury yields, which usually inversely correlate with gold prices, also fell by seven basis points, as shown by the yield on the 10-year U.S. Treasury bond.

Conversely, the Dollar is trading with marginal gains of 0.04%, as shown by the U.S. Dollar Index (DXY). The DXY follows the Dollar against a basket of six currencies and is at 104.08.

Regarding the data, the U.S. economic agenda included the publication of April’s JOLTS data and durable goods orders. The reports showed that the economy remains resilient but weak amid the higher financing costs established by the U.S. Federal Reserve.

Consequently, U.S. Treasury yields fell, and the Dollar extended its losses to three consecutive days. Yields on the 10-year U.S. Treasury bond fell by eleven basis points to 4.392%. The U.S. Dollar Index (DXY), which tracks performance against a basket of six currencies, fell by 0.5% to 104.07.

Technical Analysis: Gold Price Falls Below $2,350

The gold rally continues, although spot prices have fallen below the 50-day simple moving average (SMA) of $2,334. Price action and momentum have shifted in favor of sellers, potentially paving the way for a retracement. The RSI turned bearish, below the midline of 50, opening the door to more losses for gold.

Once XAU/USD fell below the 50-day simple moving average (SMA) of $2,334, it could pave the way to challenge the May 8 low of $2,303, followed by the May 3 cycle low of $2,277.

More gains are seen if XAU/USD buyers reclaim $2,350. The next level would be $2,400, followed by the year-to-date high of $2,450, and subsequently, the $2,500 mark.