Gold drops back towards $ 1310 as DXY re-takes 92.00

Gold (futures on Comex) extended its overnight weakness and came under renewed selling pressure in Asia this Tuesday, as the buying interest around the US dollar versus its main competitors gathered steam amid a rally in Treasury yields.

The latest leg down in the yellow metal is also on the back of increased nervousness ahead of the 2-day FOMC monetary policy meeting, which commences later on Tuesday, as markets look forward to fresh hints on a June Fed rate hike. The chances of a June Fed rate hike have increased to 92% versus 73% seen previously.

Moreover, easing trade war fears after the US President Trump postponed a decision on imposing steel and aluminum tariffs on Canada, the European Union and Mexico until June 1, also dulled gold’s attractiveness as an ultimate safe-haven asset.

Looking ahead, the precious metal will track the broader markets sentiment and price-action around the US Treasury yields, as investors brace for the US ISM manufacturing PMI and Fed decision.

Gold Technical Levels

According to Haresh Menghani, Analyst at FXStreet, “a follow-through weakness below $1310 level is likely to accelerate the slide towards the $1303 region (200-DMA), below which the commodity seems vulnerable to slide further in the near-term. On the upside, $1316 level now seems to act as an immediate resistance and is followed by 100-day SMA barrier near the $1320 region, which if cleared could lift the metal back towards $1325 supply zone.”