• Gold price is testing critical support near $1,980.
• The US Dollar is bouncing back and pressuring the yellow metal. 

Gold price has fallen from a high of $2,015.07 to a low of $1,981.19 on the day amid the rebound in the US Dollar as the hawks move back in over the sentiment surrounding the Federal Reserve again.

Federal Reserve´s Governor Christopher Waller said that despite a year of aggressive rate increases, the Fed "hasn't made much progress" in returning inflation to their 2% target and argued that rates still need to go up. We also had consumer spending for the past quarter, and the April survey of business activity in New York state rising for the first time in five months, the US Dollar gained 0.6%. This is making greenback-bullion less attractive for overseas buyers, while benchmark Treasury yields climbed to a more than two-week high.

On Monday, President and CEO of the Federal Reserve Bank of Richmond Thomas Barkin explained that he wants to see more evidence of inflation settling back to target. Barkin also said he feels reassured by what he is seeing in the banking sector. Meanwhile, Fed funds futures are showing that the expectations that the Fed will start cutting rates later this year have been pushed back to November from September, with a smaller cut now expected also. 

Gold positioning analysis

´´While the gold price previously held the most competitive risk-return characteristics on our screen, we now see elevated risks of a tactical retreat.,´´ analysts at TD Securities explained. ´´After all,´´ they say, ´´the substantial inflows tied to notable CTA long acquisitions and discretionary short covering are now grinding to a halt. CTA positioning has nearly effectively reached 'max long', and our estimates of discretionary flows still suggest that this cohort has yet to buy into the rally, suggesting that one of the main engines of the recent rally is now sputtering.´´

The analysts went on to talk of China´s holdings and developments there:

´´Evidence of notable accumulation of gold in Shanghai is reassuring for the bulls, but Shanghai positioning is now nearing local highs. That leaves physical markets in control once more, where lackluster demand in India and only modest improvements in wholesale demand in China suggest the risk of a tactical retreat in precious metals continues to grow. Still, CTA outflows are only expected below the $1960/oz range, suggesting that a catalyst may be required before more substantial outflows ensue.´´

Gold technical analysis

Gold price is back into the barroom brawl and the bulls are defending the key support area near $1,980.