Gold Falls Toward 200-day Average

Hawkish central banks

As markets prepare for additional central bank tightening this week (mainly from the Fed) following the RBA's more significant rate increase during Tuesday's Asian session, gold prices are slumping as a consequence of the gloomy background of soaring global rates and a still mighty US dollar.

On Wednesday, the Fed is likely to raise interest rates by 50 basis points, signaling that rates will reach around 2.5 % by the end of the year and announcing quantitative tightening measures. The US 10-year yield continues to flirt with the 3.0% threshold, its highest level since late 2018, ahead of the Fed's policy statement, albeit a few basis points lower on Tuesday.

Additionally, market players are growing increasingly anxious that China's economic downturn may spread to other major economies. As a result, Commerzbank economists believe the yellow metal's downward trend will continue.

Daily chart neutral

It looks like the daily chart seems a bit neutral now as gold is approaching some meaningful supports. First, the highs of January 2022 near 1,860 USD, already being tested. Second, the 200-day average (the green line) near 1,830 USD. Still, as long as gold trades above these levels, the medium-term outlook seems carefully bullish. 

However, as previously mentioned, the fundamental situation does not look as bright as before for the precious metal. 

On the upside, the price must jump above previous lows at 1,895 USD to cancel the immediate selling pressure. Once there, we might see a rally beyond the psychological 1,900 USD threshold.