Gold turned bearish in early february as the US data showed a decent rebound in the US economy, pushing the USD higher and increading the odds of further FED rate hikes in the coming months. But, the 100 SMA (green) held as support on the daily chart and last week we saw bounce after Jerome Powell’s comments that the FED hasn’t decided on a 50 bps hike for next week’s meeting. Although, the situation has deteriorated with the failure of the SVB bank. Inflation came in higher MoM on February at 0.5% but the YoY number declined to 6.0%.

GOLD prices  due to theretreated lower earlier today, being impacted by higher U.S. Treasury yields, which reduced the appeal of zero-yielding Gold, and the uncertainty caused by a steady increase in U.S. inflation in February ahead of the FED’s meeting next week. XAU/USD dropped 0.4% to $1,905.64 per ounce, while U.S. Gold futures fell by 0.3% to $1,910.

Gold Daily Chart – Gold Trades Above $1,900

The strong surge which sent Gold more than $100 higher has stalled today 

Despite the consumer inflation report showing a monthly rise of 0.4% in February, as expected, and not affecting gold prices much, some investors continue to seek financial instability hedges due to the potential for the Federal Reserve to accept higher inflation rates. Safe-haven assets like gold are likely to remain well-bid in the current environment, particularly given the risk of contagion from the collapse of Silicon Valley Bank.

As a hedge against economic uncertainties, gold becomes a more attractive bet in a low-interest rate environment, and traders are now expecting only a 25-basis-point interest rate hike by the U.S. central bank this month. Some analysts at certain banks are even predicting a 50 basis points rate cut in next week’s FED meeting, which is not too extreme, although I don’t expect a cut this time and if the situation stabilizes and inflation remains high, then the FED might even pick up thepace in May.

Gold XAU Live Chart