During yesterday's trading, gold futures returned to stabilize above the psychological resistance level of $2,000 an ounce, as the new banking turmoil renewed investors' concerns. After the collapse of First Republic, other regional banks, including PacWest Bancorp, saw their shares plunge. Therefore, the price of the yellow metal benefited from the situation with the weakness of the US dollar and more signs of a slowdown in the economy.
XAU/USD gold price rose to the $2019 resistance an ounce, recovering from the $1978 support an ounce in the same trading session. Gold is preparing for gains from the announcement of central banks led by the US Federal Reserve, which will have a strong reaction on the price of the US dollar and investor sentiment. In general, the XAU/USD gold price has added to its rise since the beginning of the year 2023 to date by about 11%. In the same performance, the price of silver, the sister commodity to gold, flirted with the $26 level once again. All in all, the price of the white metal is up nearly 6% so far this year.
Shares of PacWest have tanked as much as 36%, forcing the New York Stock Exchange to halt trading due to the extreme volatility. In fact, it has been stopped for ups and downs a few times. But other regional institutions have fallen under, such as the Western Alliance, and regional bank exchange-traded funds (ETFs) have extended their losses. Investors have expressed concern about the long-term viability of small and medium-sized regional banks, especially when new regulations are put in place and more banks fail.
KBW analyst David Conrad said in a note to clients this week: “We believe that banks with assets >$500 billion and <$60 billion are the clearest winners in the New World Order, while there is likely to be no-man's-land between 80- $120 billion, as banks in this shrinking range may need to “avoid new regulations or engage more actively in mergers and acquisitions to increase scale and absorb regulatory costs.”
In fact, JPMorgan Chase will now control about $2.5 trillion in deposits, which is 14% of all deposits in the country. Many may be wondering whether the US Federal Reserve will hit the pause button in its tightening cycle or continue to raise interest rates at the May FOMC meeting, which ends on Wednesday.
The US Treasury bond market was mostly in the red, with the exception of short-term bonds. The yields of the two-month and three-month bills increased by 21 basis points and 4.5 basis points, respectively. The benchmark 10-year yield fell 14.3 basis points to 3.431%.
Gold is usually sensitive to movements in interest rates because they can affect the opportunity cost of holding non-yielding bullion.
Meanwhile, on the economic data front, the US labor market continued to show signs of cooling. Job openings fell to 9.59 million in March less than expected, down from 9.974 million in February. The number of job leave cases decreased to 3.851 million, down from 3.98 million. Factory orders rose 0.9% in March, although they fell 0.7% when transportation was removed.
Other factors affecting the gold market
The US Dollar Index (DXY), which tracks the performance of the greenback against a basket of currencies, fell 0.23% to 101.92, from an opening of 102.15. In general, the index has decreased by 1.55% since the beginning of the year 2023 to date.
A weaker amount is beneficial for dollar-denominated commodities because it makes them cheaper for foreign investors to buy.
Relative to other metals markets, copper futures fell to $3.872 a pound. Platinum futures rose to $1,073.30 an ounce. Palladium futures fell to $1,427.50 an ounce.
XAU/USD gold price forecast today:
- The stability of the XAU/USD gold price around and above the psychological resistance at $2000 an ounce will remain strongly supportive of the upward path.
- If the bearish pressure continues on the US dollar, the opportunity may be stronger for the bulls to move towards the $2025 and $2040 resistance levels, respectively.
- This is sufficient in the same time to push the technical indicators towards strong overbought levels.
On the other hand, according to the performance on the daily chart, the bears' success in pushing the XAU/USD gold price to breach the $1970 support, as happened recently, will be a first threat to the bullish trend of gold.
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