- During last Friday's trading session, the XAU/USD gold price retreated from its current high in 12 months at the $2009 resistance level.
- Profit-taking sales pushed it to the $1935 support level, before closing trading around the $1977 level.
- The bulls try to maintain the bullish momentum. The historical psychological peak of 2000 dollars an ounce.
XAU/USD is trading on the outcome of the latest economic data as US Durable Goods Orders for February missed the expected change of 0.6% with a change of -1%. Non-defense orders for non-defense aircraft outperformed the expected change of 0% with a change of 0.2%. US Initial Jobless Claims exceeded expectations by 201 thousand with a count of 191 thousand. Prior to that data, the Federal Reserve raised the US benchmark interest rate by 25 basis points to 5% in line with expectations. Analysts now expect the US interest rate to drop to 4.3% within a year and to 3.1% in two years before stabilizing at 2.5% over the long term.
Stock Market Analysis:
The S&P 500 rose 0.6% as the benchmark posted its second consecutive weekly gain. The Dow Jones Industrial Average rose 0.4%, while the Nasdaq Composite closed 0.3% higher. The optimism came towards the end of the week as markets were turbulent due to fears of banks' vulnerability under pressure from higher interest rates. This has led to growing concerns about a possible recession and great uncertainty about what the Fed and other central banks will do with regard to interest rates going forward.
On Friday, the biggest focus was on Deutsche Bank, whose shares fell 8.5% in Germany. Earlier this month, Swiss bank Credit Suisse's shares and faith in it fell so much that regulators brokered its takeover by rival UBS. Credit Suisse has faced a relatively unique set of chronic problems. But the second and third largest US bank failures in history earlier this month cast a harsher light across the entire banking industry.
Other major European bank stocks also fell on Friday, including a 5.5% drop in Germany's Commerzbank, a 5.3% drop in France's BNP Paribas, and a 3.5% drop in UBS. Banking stocks closed mixed on Wall Street. At a time, JPMorgan Chase fell 1.5%, while Bank of America rose 0.6%.
In the US, investors have been primarily chasing banks that might face a debilitating exodus of customers, similar to what helped cause the failures of Silicon Valley Bank and Signature Bank. Investors focused on small and medium-sized banks, and banks that fall under the size of the "too big to fail" banks were considered to be higher risks. First Republic Bank closed down 1.4%. It's down 90% for the year.
For her part, US Treasury Secretary Janet Yellen said that in cases where the government sees a risk to the system as a whole, it will guarantee deposits for bank customers, even those with more than $250,000 insured by the Federal Deposit Insurance Corporation. This is what regulators have done for both Silicon Valley Bank and Signature Bank. But Yellen this week also stopped offering a blanket guarantee to all depositors at all banks.
Cash-strapped banks are still queuing up this week to borrow money from the Fed. For its part, the US Federal Reserve said last Thursday that emergency lending to banks decreased slightly in the past week - to $164 billion - but remained high. A major concern is that all the pressure on the banks will lead to a decline in lending to SMEs across the country. This, in turn, could lead to fewer hiring, a weaker economy, and a greater likelihood of a recession that many economists have already seen as likely.
While the job market has remained remarkably strong, other parts of the economy are already weakening under the weight of higher rates. On Friday, economic reports came in mixed. One showed that orders for long-dated manufactured goods were slower last month than economists expected.
Technical analysis of gold prices:
In the near term, and according to the performance on the hourly chart, it appears that the XAU/USD gold price is trading within a bullish channel formation. This indicates a significant short-term bullish bias in market sentiment. Therefore, the bulls will look to extend the current run of gains towards $1987 or higher to $2005 an ounce. On the other hand, bears will look to pounce on pullbacks around $1966 or lower at $1952 support.
On the long term, and according to the performance on the daily chart, it appears that the yellow metal XAU/USD is trading within forming a sharp bullish channel. This indicates a strong long-term bullish bias in market sentiment. Therefore, the bulls will be looking to ride the current rally towards $2022 or higher to the $2067 resistance. On the other hand, the bears will target long-term profits at around $1932 or lower at $1885 an ounce.
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