Following yesterday’s rally in a short-squeeze, gold prices continued to refresh two-month highs seen around $1,846 earlier in a largely quiet session on Thursday. On Wednesday, the precious metal saw the largest daily gains since November, deriving support from a downside correction in US Treasury yields that pushed the dollar lower.
Also, the bullion’s appeal is helped by a cautious tone in the global financial markets as investors brace for a hawkish Federal Reserve meeting due next week and keep monitoring developments in geopolitics. Yesterday, US President Joe Biden said that he expects Russia to move in on Ukraine. He also highlighted readiness to impose the severest sanctions on the Russian government and military officials.
The XAU/USD pair jumped from the ascending 20-DMA to exceed the $1,840 region for the first time since late November before steading in recent trading. Of note, in the process, the yellow metal exceeded the $1,830 significant barrier that capped bullish attempts at the start of 2022. As such, it could be a solid bullish signal in the short term.
Should the prices manage to hold around the mentioned multi-week highs and refrain from a downside correction at this point, the bullion may target the $1,850 region. For the time being, it looks like the path of least resistance is to the upside. However, gold may be looking too elevated given higher real yields and rising hawkish Fed bets.
So, ahead of next week’s Fed meeting, gold remains at risk of experiencing renewed downside pressure. On the downside, should the prices fall back below $1,840 and fail to defend the $1,830 critical support, traders will shift the focus back to the 20-DMA, currently at $1,814.