- Gold hits weekly highs despite higher yields.
- XAU/USD is testing the $1870 resistance area.
- DXY and US yields are at the highest level since May 9.
Despite higher US yields and a stronger dollar, gold prices are soaring on Friday. XAU/USD rebounded again at the $1830 but this time it broke $1850 and a few minutes later reach $1870.
Gold finally reacting to inflation?
After the US May CPI report, XAU/USD bottomed at $1824, the lowest level in three weeks as Treasury yields move higher. After moving sideways in a wide range, gold broke above $1850 and gained more strength.
Technical factors and probably the yellow metal finally reacting to inflation, are boosting gold. In the short term, bears appear to be capitulating. The rally in gold is taking place even as the dollar and US yields soar.
The DXY is up by 0.80%, at 104.15, the highest level since May 17. The US 10-year yield stands at 3.15% and the 30-year at 3.22%, both at the highest since May 9. At the same time, the Dow Jones and the S&P 500 are falling by more than 2%.
Usually, a context of higher yields, risk aversion and a stronger dollar is negative for gold. During the last hour, it has not been the case. From the daily low, XAU/USD has risen so far $45.
Form a technical perspective, if XAU/USD holds above $1870 it would point to more gains. The next strong barrier is seen at $1890. On the contrary, a reversal from current levels, back under $1850 would put gold back under pressure.