Gold bears eyes break of $1700 as dollar and yields surge

Gold couldn’t hold onto its earlier gains, and now a big breakdown looks almost certain. Recession concerns around the world continue to boost the appetite for US dollar, even at these levels. Investors are becoming more and more convinced that the Fed is going to raise rates by another 75 basis points this month and proceed with further aggressive hikes until inflation comes back under control.

As well as the gold price reversal, we saw the USD/JPY surge further higher towards the 143 handle in what has been one of the steepest falls for the yen, while the likes of the Chinese yuan also slumped. The EUR/USD tried to get back towards parity but couldn’t even get there, before dropping lower again. Similarly, other major currency pairs struggled as the dollar roared higher.

The reversal in gold prices means the metal is currently displaying an inverted hammer candle on the daily chart, after it turned lower from key resistance around $1725. Given the dollar rally, bond market sell-off and now this bearish-looking technical setup, the precious metal could well break further lower from here. It looks like the bears might be targeting the presumably big pool of liquidity resting below $1676, last year’s low. Undoubtedly, that’s precisely where many trapped long traders’ stop loss orders would be resting.