Lower In Asia As Dollar Rallies

Gold is $12/oz softer printing ~$1,946/oz at writing, operating a touch above Friday’s trough. The precious metal has come under pressure on the back of a firmer USD, with higher U.S. Tsy yields and Fed/BoJ policy divergence allowing the DXY to hit the highest level observed in ~2 weeks.

• To recap, bullion recovered from worst levels on Friday to close virtually unchanged, finishing the week ~$30/oz better off. The rebound was facilitated by rising tensions between Russia and the west amidst a flurry of announcements from Russia-focused meetings between leaders of the G7, NATO, and the European Council, neutralising an uptick in U.S. real yields.
• May FOMC dated OIS now prices in ~45bp of tightening, pointing to an 80% chance of a 50bp rate hike at that particular meeting. The expectation for the May FOMC is a little lower than levels witnessed early last week (after Fed Chair Powell’s hawkish comments on Monday), while OIS markets now show a cumulative ~200bp of Fed tightening priced in for the rest of calendar ’22.
• Looking to technical levels, the short-term outlook for gold is still bearish, providing space for the recent overbought conditions to unwind. Resistance is situated at $1,966.1/oz (Mar 24 high), while support is located at $1,903.7/oz (50-day EMA).