Slightly Lower As Powell Blesses Possibility Of 50bp Hike For May

Gold is ~$3/oz weaker to print $1,948/oz, operating a touch above the session’s worst levels at typing, and remaining clear of Thursday’s two-week lows. The precious metal has declined after struggling for direction earlier in the session as nominal U.S. Tsy yields have pushed higher in Asia-Pac dealing, with 2-Year Tsy yields resuming a climb above recent cycle highs.

• To recap, the precious metal hit session lows (@ $1,936.8/oz) on Thursday amidst a rise in nominal U.S. Tsy yields, with the move in the latter facilitated by the latest in hawkish remarks from central bank speakers on both sides of the pond. Looking to the Fed, Chairman Powell on Thursday signalled support for a 50bp hike for the May FOMC, while hinting at further 50bp hikes for following meetings as a form of “front-end loading” of hikes.
• May FOMC dated OIS are now fully pricing in a 50bp hike for that meeting in the wake of Powell’s comments, with pricing for the next two meetings (in mid-June and end-July) pointing to consecutive 50bp hikes as well. Pricing to end ‘22 has firmed to ~250bp at writing, easily surpassing highs seen earlier this month.
• From a technical perspective, gold’s failure to hold on to recent highs signals the potential for further bearishness in the near-term. Initial support is seen at around ~$1,926.5/oz (50-Day EMA), while resistance is located at $1,998.4/oz (Apr 18 high and bull trigger).