The yellow metal slipped below the $1,700 threshold during the New York session on Wednesday as the greenback gathered pace across the board. The XAU/USD made fresh YTD lows at the $1,695 area as the market sentiment deteriorated.
The U.S. Dollar Index advanced modestly and trades above 107.00 following three consecutive daily losses. At the same time, U.S. Treasury yields retreated – but the mild pullback did little for gold price – while the 10-2 Year Treasury Yield Spread curve remained inverted.
Meanwhile, on Thursday, investors await the European Central Bank decision. Bloomberg's World Interest Rate Probability (WIRP) tool suggests that a 25 bps hike is fully priced in for tomorrow’s meeting, but reports suggest that a 50 bps hike is not taken off the table. However, the hawks and doves division remains wide in the Governing Council as officials struggle to reach a consensus on its new anti-crisis tool. Hence, it is more likely that Madame Lagarde will opt for the more cautious move.
From a technical perspective, XAU/USD holds a short-term bearish outlook according to indicators on the daily chart, while the price continued to move lower after taking out the YTD lows. Still, the RSI stays in oversold territory, which could temper the yellow metal’s losses.
On the downside, the next level is a major support area around the 2021 yearly lows of $1,676, followed by the $1,600 zone. On the other hand, immediate resistances are now seen at $1,700, followed by the weekly high of $1,723 and then the 20-day SMA at around $1,762 an ounce.