The XAU/USD pair is currently attempting to extend its previous day’s gains, having reached a five-week high recently. However, the precious metal experienced a decline on Wednesday, dropping to $1,901.

This decline has resulted in the metal consolidating at a low position for the second day in the last week, which suggests some uncertainty in the market regarding the direction of gold prices.

This consolidation period comes after the dollar saw an uptick in potential. In addition, this consolidation was due to the rise in treasury bonds, which has resulted in losses ahead of some crucial US economic data.

Gold Price Eases As USD Tracs Treasury Yields Comeback

The DXY (US Dollar Index) is on an uptick trajectory, rebounding to intraday highs at the 103.75 regions. Unfortunately, this uptick occurs during a two-month low period, putting downward pressure on the price of gold.

The dollar’s strength against other currencies is due to the latest recovery in US Treasury yields amid building bets that the FOMC meetings will continue to raise interest rates. The March 22 meeting is expected to yield a 0.25% rate hike, further strengthening the US dollar.

US Treasuries saw a two basis points uptick at the time of writing, hitting 3.70%, after posting the biggest gains in the last five weeks. The two-year bond yields also had a good day, extending the previous day’s recovery from six months to 4.31%.

Investors should also note that the CPI (Consumer Price Index) and the CPI that excludes food and energy matched analysts’ predictions of 6.5% and 5.6%, respectively. The previous market consensus of 0.5% and the current consensus of 0.4% align with the CPI, excluding the Food and Energy sectors.

According to Reuters, the Fed will continue raising interest rates with the inflation figures not showing any signs of slowing. This move is causing concerns about a contagious banking crisis, tearing market confidence in the US. The uptick in US Treasury yields and the hawkish Fed triggered the XAU/USD pair, keeping the US dollar high and short-sellers hopeful.

XAU/USD Technical Analysis

Despite the XAU/USD pair successfully breaching the 20-day Simple Moving Average, the precious metal’s price did not meet the previous support at $1,913 at the time of writing. The XAU/USD pair drawdown takes cues from oversold positions in the Relative Strength Index (RSI) threshold, placed at 14, and declining bull indicators, especially from the Moving Average Convergence Divergence (MACD) indicator.

It’s important to note that bears have also been struggling with the $1,900 level. However, the 50% Fibonacci of gold in February at the $1,800 level can create an extra downturn at the 50 and 200-day SMAs at $1,850 and $1,860 levels, respectively.

On the flip side, if the precious metal’s price creates a clear break and immediate support turns resistance at the $1,913 level, it could propel the price toward the $1,959 level. In addition, this movement could trigger a sprint to $1,960, $1970, and $1985 levels, which will lead to a huge run toward $2000.

Overall, the XAU/USD pair faces fewer hurdles on its journey up, but bulls need to recharge and target the helm. Sellers remain keen on hitting critical support levels that could propel the pair south below $1,900 and target $1890.