As yields/USD move higher, gold is falling sharply. The price cracks below it 100 day MA/trendline

The slightly stronger-than-expected U.S. PPI (5.4% vs 5.3% estimate although the core came is as expected at 4.6% but above 4.3% last month) report has pushed Treasury yields and the U.S. dollar higher. Inflation remains well above the Federal Reserve’s 2% target, the hotter data reminds traders that the Fed may need to keep monetary policy restrictive for longer. The U.S. Dollar Index is up 0.31%, while the 10-year Treasury yield has risen 7.4 basis points to 4.911%. That is its highest level since late October 2023.Those moves are creating a headwind for gold.The price of gold has moved sharply lower and, in the process, broken below an important cluster of technical support near $4,356. That area includes:The 100-day moving averageAn upward-sloping trendlineThe 200-bar moving average on the four-hour chartWhen several technical tools converge near the same price, that area tends to attract greater attention from traders. Buyers previously leaned against the cluster because it offered a clear level against which risk could be defined and limited. With the price now trading below it, however, that former support becomes resistance.Stay below $4,356, and the sellers remain more in control. Move back above it, and traders may view the break as a failure. That could disappoint sellers and encourage buyers to reenter.The next downside target is the 50% midpoint of the move up from the late-June low. That level comes in at $4,319.75. The price has reached $4,324.16 so far during volatile trading, putting gold within a few dollars of that target.imageWhy do rising yields and a stronger dollar tend to hurt gold?Gold often moves lower when U.S. interest rates and the U.S. dollar rise for two main reasons.First, gold does not pay interest. When Treasury yields rise, investors can earn a better return by holding interest-paying U.S. government debt. That raises the opportunity cost of owning gold. In simple terms, investors give up more potential interest income when they choose gold instead of Treasuries.Second, gold is priced in U.S. dollars. When the dollar strengthens, gold becomes more expensive for buyers using euros, yen, pounds and other currencies. That can reduce international demand and put additional downward pressure on the price.The typical relationship is:U.S. yields rise → gold becomes relatively less attractiveThe U.S. dollar rises → gold becomes more expensive for overseas buyersYields and the dollar rise together → gold can face increased selling pressureHowever, that relationship is a tendency—not a guarantee. Gold can still rise alongside yields and the dollar when investors are seeking safety because of geopolitical tensions, persistent inflation or broader financial-market stress.That is why traders cannot rely on the fundamental story alone. The price action still matters. In this case, the move below the $4,356 technical cluster tells traders that sellers have taken greater control. As long as the price remains below that area, the downside bias remains intact, with the 50% midpoint at $4,319.75 representing the next key target to get to and through. This article was written by Greg Michalowski at investinglive.com.