Gold Price Corrects After UBS Announces Credit Suisse Rescue Plan
Arslan Butt • 1 min read
GOLD (XAU/USD) has dropped to roughly $1,970 after UBS reported a rescue plan for Credit Suisse.
Although the price of GOLD seems to be stabilizing around here, a deeper decline is still possible.
It’s important for investors to remember that the recent influx of capital into GOLD was spurred by worries about the market’s volatility in light of a probable financial catastrophe.
Fears of a worldwide banking crisis have subsided, however, thanks to the merger agreement between UBS and Credit Suisse, which shows that central banks are willing to help commercial banks restore investor confidence.
The greenback is displaying choppy activity around 103.85 as investors await the Federal Reserve’s rate decision on Wednesday.
Danske Bank’s research indicates that Federal Reserve Chair Jerome Powell will raise interest rates by 25 bps notwithstanding recent concerns in the banking industry.
While early morning gains for S&P500 futures after the UBS-Credit Suisse transaction was announced, those gains have now been cut in half, indicating that the agreement is not adequate on its own to allay global banking fears.
Since the banking situation has yet to fully display its true colors, pessimism in the markets is likely to last for some time.
The merger of UBS and Credit Suisse also dampened demand for safe-haven US government bonds, leading to a jump in 10-year Treasury yields to 3.46 percent.
GOLD prices rose after technically breaking out of the symmetrical triangle chart pattern in the one-hour time frame.
GOLD bulls may see a mean-reversion to around the 20-period EMA at $1,965, while the RSI (14) continues in the bullish region of 60 -80, indicating strong upside momentum.