Gold bulls hit 100-day SMA wall as US yields bite

Gold prices reached a 100-day Simple Moving Average (SMA) wall of $4,328 on Tuesday, held up by solid resistance from US bond yields and a strong US Dollar. The metal struggled as energy prices surged due to a Houthi attack on an oil pipeline in Saudi Arabia, which could cause a production loss of 7 million barrels a day for weeks.

Inflation fears drove the 10-year US Treasury yield past 5%, reaching a 19-year high, making gold less attractive due to its non-yielding nature. Investors anticipate a 25-basis-point rate hike by the Federal Reserve (Fed), with odds at 95%, leading to a more appealing bullion outlook. The odds of a rate hike in October and December stand at 97% and 99%, respectively, according to Prime Terminal.

The US Dollar Index (DXY) climbed to 99.66, up 0.19%. ADP Employment Change for the past four weeks rose by 16.25K, revised to 12.25K. The Federal Reserve's monetary policy decision will take place on Wednesday, followed by the Bank of England keeping interest rates steady at 3.7%, and the Bank of Japan raising rates by 25 basis points to 1.25%.

Analysts predict that gold will remain trapped between the 100- and 50-day SMAs, with a potential bullish breakout requiring the 100-day SMA to be cleared at $4,328. Should it surpass the psychological $4,350 level, the next target is $4,400, followed by the $4,500 milestone. If these levels are breached, the 200-day SMA at $4,539 and $4,600 become the next supply areas.

Conversely, a drop below the 50-day SMA at $4,275 could expose XAU to a potential drop to the July 6 high at $4,202 and the July 29 swing low of $3,996. Gold has historically served as a store of value, hedge against inflation, and safe haven during turbulent times, with central banks adding 1,136 tonnes worth around $70 billion to their reserves in 2022.