September 16, 2022, 7:00 p.m
•The pullback in the US dollar pushes gold towards $1680.
•Reversal offers hope for XAU/USD bulls.
•The dollar still remains firm ahead of the FOMC meeting.
After a report from the University of Michigan showed a drop in inflation expectations, the dollar and US yields retreated, sparking a rebound in gold, which recovered from multi-month lows towards $1,680.
XAU/USD broke above $1670 and climbed as high as $1680, setting a new daily high. It is still holding an important weekly loss and the lowest close since April 2020, but a rally could contribute to a short-term turnaround. Gold is facing a strong resistance area between $1680 and $1695.
The main trend is bearish and gold is currently hovering around $1673, where the 200-week simple moving average stands.
Gold's sharp rally came after the University of Michigan's September preliminary Consumer Sentiment report showed a decline in medium- and long-term inflation expectations. The main index rebounded from 58.2 in August to 59.2 in September, below the market consensus of 60.
The news sent Treasuries down, as well as the weight of the dollar, which turned negative. DXY fell to 109.50 from 110.25. The two-year yield retreated from its highest since 2007 at 3.92% to 3.88% and the 10-year yield from 3.49% to 3.42%.
Gold is benefiting from a staged sharp rebound. Silver also turned positive as XAG/USD rose towards $19.50. Silver is headed for a modest weekly gain.
Next week's FOMC meeting is critical for gold prices. The central bank is expected to raise rates by 75 basis points and maintain a hawkish tone with inflation as a major concern; all factors that supported the dollar and kept metals under pressure.