Real-yield slide keeps gold underpinned as growth worries swirl

Gold rebounded in the closing stretch of last week even as US inflation arrived above expectations. As so often happens with the metal, the cause was a decline in real yields, which are determined by nominal yields and inflation expectations.

Inflation expectations have largely held their ground, owing to persistently elevated energy prices and a Federal Reserve that remains less than hawkish. Nominal yields, however, slipped after the inflation data, moving in step with growth-sensitive assets such as stocks and copper. That may have been an early sign that growth concerns are building.

When worries about growth coincide with high inflation, gold tends to find support. The next important catalyst is Friday's US Flash PMIs.

If those figures come in weaker than expected, growth fears could mount and trigger a dovish repricing further along the curve. That would push real yields down and should be bullish for gold. A stronger-than-forecast result, by contrast, could ease those fears and send the precious metal lower again.

GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME

The daily chart shows gold (CFD contract) consolidating along its descending trendline. Sellers may step in there, risking above the trendline, to position for a slide toward 3,885. Buyers, for their part, will want a move above the line before adding longs, with a climb to 4,700 in view and 4,500 as the first target.

GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

On the four-hour chart, a strong resistance zone sits around 4,228. Sellers might split their short entries if price pushes above the trendline and tests that zone. Buyers, meanwhile, need a break above resistance to clear the way for fresh highs and then aim for 4,400.

GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the one-hour chart, a minor support zone is located around 4,130. Should price pull back from the trendline or resistance, buyers could emerge near that support, risking below it, to keep pressing toward new highs. Sellers will instead wait for a downside break to add to bearish positions and target 3,885 next. The red lines define today's average daily range.

UPCOMING CATALYSTS

On Thursday, the latest US jobless claims figures are due, and Friday wraps up the week with the Flash US PMI readings.