Gold prices slumped on Tuesday, extending losses into a second day, as U.S. Treasury yields continued to push higher ahead of the Federal Reserve decision.
The yellow metal (XAU/USD) fell to a low of $1,805 an ounce during the New York session despite the risk-averse environment as investors increased their bets that the Fed could “surprise” with a higher-than-expected rate hike.
Jerome Powell has hinted at a 50 basis points hike in June and September. However, after CPI data on Friday showed U.S. inflation reached yet another four-decade high of 8.6%, some participants now expect the FOMC to raise rates by 75 bps.
As a result, U.S. Treasury yields have reached fresh multi-year highs, underpinning the greenback and weighing on the non-yielding metal. The yield on the United States 10-Year note climbed to an 11-year high of 3.497% on Tuesday.
From a technical perspective, XAU/USD holds a bearish short-term bias according to the daily chart. The price trades below its main moving averages after breaking below the 20-day SMA on Monday, while indicators have entered negative territory.
The RSI has gained a downward slope and is deep into the red, although still not hitting oversold levels, while the MACD has printed a red bar.
The immediate support level is seen at the $1,800 threshold, with a break below this level paving the way for a retest of the May low at $1,786 and then the $1,760 area.
On the other hand, the convergence of the 20- and 200-day SMAs offer critical short-term resistance at the $1,840-45 zone. A break above this area could ease the immediate bearish pressure exposing the next target at $1,880.