Gold Returns to $2,000 Despite Global Uncertainties

Gold has been on demand in recent months, as money managers started acquiring gold positions once more on continued stress in the banking sector, Gold shorts covered ahead of the FED meetiungon Wednesday evening. Markets now agree that the FED has reached the near terminal rate.

XAU/USD surged to the all time-high at $2,070 as the banking issues resurfaced. Although, despite a lengthy process, it became evident to the markets that First Republic Bank would eventually reach a resolution over the past weekend. In the early hours of Monday morning, a deal was indeed struck, with JP Morgan identified as the most suitable candidate to take over the bank’s depositors.

However, merely a day later, the US regional banking index experienced a decline as PacWest Bancorp and Western Alliance encountered renewed selling pressure, leading to a decrease in their respective share prices. But buyers failed to take put that major level and we saw a pullback toward the end of the week. Gold prices fell below $2,00 on Friday after an unexpectedly jump in the US Nonfarm Payrolls report whereby the United States added 253K new jobs last month, well above the consensus estimate for a rise of 180K.

After that report, the market is considering a scenario where the FED mightpush a bit further with rate hikes, although it seemsunlikely to me.  Consequently, US Treasury yields were higher, which is bearish for Gold since it offers no interest. The US two-year note was last seen paying 3.916b, up 11.1 basis points.

If the FED does pause, it points to a substantial and continued increase in XAU/USD ahead, given the last pause and cutting cycle saw discretionary GOLD positioning rise substantially more than its current levels. Gold returned below $2,000 briefly on Friday, but the 20 SMA (gray) held as support on the daily chart and eventually the price closed above that major level. So, right now the future of Gold is uncertain, whether buyers will push above the all-time-high.