Gold prices fell for the second session in a row on Monday as the US dollar appreciated, as investors evaluate the measures taken by the authorities to allay fears of the crisis in the global banking sector. Analysts interpret the latest developments in the market and evaluate the technical outlook of gold.
Markets adopt a cautious stance
cryptocoin.comAs you follow, First Citizens BancShares Inc will receive all Silicon Valley Bank’s deposits and loans from Federal Deposit Insurance Corporation. The news created an uneasy lull on fragile markets on Monday. Spot gold was down 0.97% at $1,959 at the time of writing. U.S. gold futures slid 1.29% to $1,958.4. OCBC FX strategist Christopher Wong comments:
Markets continue to adopt a cautious stance… On the net, continued concerns of growth concerns and banking stresses could benefit safe-haven candidates such as USD, JPY and gold, meanwhile.
Allocations to precious metal are increasing
Gold rallied above $2,000 after the sudden collapse of two US lenders, but has since pulled back from those levels following authorities’ bailouts, including UBS’s takeover of ailing Credit Suisse. However, concerns remain that regulators have yet to contain the worst shock to the banking sector since the 2008 financial crisis, following Deutsche Bank’s depreciation on Friday.
Meanwhile, Neel Kashkari, Governor of the US Federal Reserve in Minneapolis, said that the recent stress in the industry and the possibility of a subsequent credit crunch have brought the US closer to recession. According to the CME FedWatch tool, markets are pricing in a 70% probability that the Fed will keep interest rates steady at its May meeting. The threat of recession has caused investors to increase their allocations to the precious metal heaps, ANZ’s note said.
Gold prices technical analysis: Gold is off the bulls’ radar
Market analyst Anil Panchal draws the technical picture of gold as follows. Gold prices seesaw inside a short-term triangle pattern after breaking a three-week uptrend. The lower highs in the gold price are proportional to the lower highs of the Relative Strength Index (RSI) line at 14, which indicates that the price is further bearish. The latest bearish signal from the Moving Average Convergence Divergence (MACD) indicator adds strength to the bearish expectations.
However, the latest lower line of a specified triangle near $1,960 is limiting the short-term gold price decline. Another issue to challenge the golden bears is the 50-bar Simple Moving Average (SMA) surrounding $1,955. If gold price breaks the $1,955 support, the possibility that gold will witness a decline towards the 50% Fibonacci retracement from late February to March 20, near $1,906 cannot be ruled out.
Alternatively, an upside break from the above-mentioned triangle’s latest resistance line near $2,003 could call back buyers of gold. Even so, the high marked around $2,010 on March 10, 2022 could serve as an extra check for gold bulls before targeting the previous year’s high of $2,070. Overall, gold prices seem to be off the bull’s radar. But the bears need to be confirmed at $1,955 to regain control.
Gold prices may fall to this level
According to preliminary data from CME Group, open interest in the gold futures markets increased by about 16,000 contracts this time for the second session in a row on Friday. Volume followed suit, increasing by around 67.4k contracts, adding to the previous daily pattern.
Gold erased some of the recent rally on Friday. The decline was behind rising open interest and volume, leaving the door open for further weakness in the very near term, according to market analyst Pablo Piovano. However, the analyst states that the precious metal may revisit recent lows around $1,930.
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