May 30, 2024

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Gold Price Forecast: XAU/USD holds steady above $1,920 level amid banking crisis fears

3 min read
  • Gold price reverses an intraday dip and draws support from a combination of factors.
  • Fears of a full-blown global banking crisis continue to benefit the safe-haven XAU/USD.
  • A weaker US Dollar further lends support to the metal amid the cautious market mood.
  • Bets for additional rate hikes by major central banks act as a headwind for Gold price.

Gold price attracts some dip-buying near the $1,908-$1,907 region on Thursday and stalls the previous day’s modest retracement slide from its highest level since early February. The XAU/USD sticks to its modest gains above the $1,920 level through the first half of the European session, albeit lacks follow-through or a bullish conviction.

Banking crisis fears lend support to the safe-haven XAU/USD

Despite a positive development surrounding the Credit Suisse saga, worries about a full-blown global banking crisis continue to lend some support to the safe-haven Gold price. It is worth recalling that the troubled Swiss bank announced this Thursday that it will exercise an option to borrow up to $54 billion from the Swiss National Bank (SNB) to shore up the liquidity. Investors, however, remain concerned about a broader systemic risk in the wake of last week’s collapse of two mid-size banks in the United States (US) – Silicon Valley Bank and Signature Bank.

Weaker US Dollar further benefits Gold price

Nevertheless, Credit Suisse’s move to bolster its financial position forces the US Dollar (USD) to reverse a part of the overnight strong gains of over 1%. This, along with the prevalent cautious mood around the equity markets, turns out to be another factor acting as a tailwind for the US Dollar-denominated Gold price. That said, the prospects for additional interest rate hikes by major central banks keep a lid on any meaningful upside for the non-yielding yellow metal. This, in turn, warrants some caution before placing aggressive bullish bets around the XAU/USD.

Bets for more rate hikes by major central banks cap gains

Market participants seem convinced that the Federal Reserve (Fed) will still deliver at least a 25 basis points (bps) rate hike at its upcoming policy meeting on March 21-22. The bets were lifted by the US Consumer Price Index (CPI) report released earlier this week, which showed that inflation isn’t coming down quite as fast as hoped. Furthermore, reports indicate that European Central Bank (ECB) policymakers are still leaning towards a 50 bps rate hike later this Thursday as the Eurozone economy is picking up strength and inflation is expected to remain high for years.

Macro data from United States eyed for some impetus

The markets, meanwhile, are pricing in a 50-50 chance that the Bank of England will hike interest rates by 25 bps next week. This makes it prudent to wait for strong follow-through buying before positioning for an extension of the recent strong rally in Gold price, witnessed over the past one-and-half week or so. Traders now look to the US economic docket, featuring the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, Building Permits and Housing Starts for a fresh impetus later during the early North American session.

Gold price technical outlook

From a technical perspective, any subsequent move up is likely to confront stiff resistance near the overnight swing high, near the $1,937-$1,938 region. The next relevant hurdle is pegged around the $1,959-$1,960 area, or a multi-month top touched in February, which if cleared decisively will be seen as a fresh trigger for bullish and pave the way for a move towards the $2,000 psychological mark.

On the flip side, the daily low, around the $1,908-$1,907 area, seems to protect the immediate downside ahead of the $1,900 round figure. This is followed by the $1,886-$1,885 zone, below which Gold price could slide back to test the weekly low, around the $1,872-$1,871 region. Some follow-through selling will negate any positive outlook and shift the near-term bias in favour of bearish traders.

Key levels to watch

XAU/USD

OVERVIEW
Today last price1920.37
Today Daily Change1.83
Today Daily Change %0.10
Today daily open1918.54
TRENDS
Daily SMA201844.9
Daily SMA501875.45
Daily SMA1001818.14
Daily SMA2001776.01
LEVELS
Previous Daily High1937.39
Previous Daily Low1885.77
Previous Weekly High1870.09
Previous Weekly Low1809.46
Previous Monthly High1959.8
Previous Monthly Low1804.76
Daily Fibonacci 38.2%1917.67
Daily Fibonacci 61.8%1905.49
Daily Pivot Point S11890.41
Daily Pivot Point S21862.28
Daily Pivot Point S31838.79
Daily Pivot Point R11942.03
Daily Pivot Point R21965.52
Daily Pivot Point R31993.65

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