Gold Price Caught Between Banking and Inflation Concerns; Quick Daily Outlook

Posted Wednesday, March 29, 2023 by
Arslan Butt • 2 min read

GOLD price (XAU/USD) remains cautious around $1,972, following a two-day losing streak, as market participants seek further information amid mixed sentiments and upcoming key data releases. The recent optimism over banking turmoil resolution, month-end positioning, and a sparse economic calendar have contributed to the restrained gold price movements. However, the upcoming data releases could stimulate commodity traders and influence gold price trends.

 GOLD price has been influenced by a combination of factors, such as the US Dollar’s inability to capitalize on a rebound in US Treasury bond yields, mixed market sentiment, and mostly positive US data. This could be attributed to month-end positioning and recent challenges to market sentiment arising from banking sector news.

Recent US economic data has shown that the United States Conference Board (CB) Consumer Confidence rose to 104.2 in March, outperforming the expected 101.0 and an upwardly revised previous figure of 103.4. Additionally, the US Housing Price Index increased by 0.2% MoM in January, beating the expected -0.6% and the previous -0.1%. The S&P/Case-Shiller Home Price Indices matched the 2.5% YoY forecasts for the same month, compared to the previous 4.5% reading.

Despite Wall Street closing with mild losses and US Treasury bond yields recovering, the US Dollar Index (DXY) failed to improve as hawkish Fed bets eased. CME’s FedWatch Tool indicates that market participants place approximately 65% bets on another 0.25% rate hike for the May 03 meeting.

The US Dollar’s inability to benefit from mixed US data and the market’s uncertainty regarding the banking crisis has been noteworthy. Initially, markets reacted positively to First Citizens BancShares’ agreement to acquire all of the failed lender Silicon Valley Bank’s deposits and loans. However, they later shifted focus to the efforts of the European Union and the United States to defend their respective banking sectors.

The debated $5.4 million Credit Default Swap (CDS) trade of Deutsche Bank has recently weighed on market sentiment, providing some relief to gold buyers. Furthermore, comments from US House Speaker Kevin McCarthy and European Banking Authority (EBA) Chairman Jose Manuel Campa also contribute to market concerns.

Geopolitical tensions involving China, Russia, and North Korea also impact the XAU/USD price. Recent developments in Sino-American relations, US President Joe Biden’s concerns about Russia’s shifting of nuclear weapons to Belarus, and North Korean Leader Kim Jong Un’s nuclear power readiness statements raise the market’s fears of potential deadly conflict. These factors, combined with month-end positioning and a light calendar, pose challenges to gold buyers.

Gold Technical Outlook

GOLD price finished yesterday on a positive note, breaking the $1,962.50 level and settling above it, reactivating the main bullish trend scenario and aiming to achieve gains starting with the testing of the $2,000.00 barrier. This makes the bullish bias likely for today.

The EMA50 supports the continuation of the expected rise, while the negative stochastic may cause some temporary sideways fluctuations before resuming the bullish wave.

As a result, we anticipate positive trades in the upcoming sessions, contingent upon the price maintaining stability above the $1,962.50 level. Breaking this level would subject the price to corrective bearish pressure, targeting the $1,933.20 area as the first negative stop.

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