Gold tests psychologically important support level
Source: www.tradingview.com
Gold has charted a series of lower peaks followed by lower troughs. Thus, the precious metal's price action is in a defined downtrend. XAUUSD is challenging critical support around the $1,700 level (green horizontal) and is currently below it at $1,686. This level has held since the beginning of the pandemic in 2020, and a sustained breach below may prove psychologically significant to market participants.
Gold topped out near the week of 14 March 2022 (black dashed vertical). During this period, the FOMC first acknowledged its intent to normalise its balance sheet. This admission resulted in an appreciation in the real rate. During the week of 25 April 2022 (blue dashed vertical), it turned positive for the first time since the start of the pandemic period (middle chart).
The positive rate corresponds to an acceleration in the decline of the gold price. I.e., the prospect of a real yield is drawing capital away from the precious metal. To this end, the correlation coefficient between XAUUSD and the real yield became significant, currently at -62%
Given the need to control inflation, the prospect of higher interest rates is a headwind for gold. As such, in our view, the probability of lower prices is the path of least resistance.
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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