Gold Technical Analysis: Gold Price in a State of Instability
Surprisingly, the XAU/USD gold price was exposed to quick profit-taking sales. As a result, prices moved towards the $1885 support level, but soon the bulls returned to control and pushed the gold price strongly upward towards the $1937 resistance level, the highest price in five weeks. The price of gold is stable around $1918 an ounce at the time of writing the analysis.
Volatility has gripped financial markets with fresh turmoil at Credit Suisse Group AG after days of the collapse of some US regional banks spurred a frenzied rush for shelter, sparking memories of the 2008 global financial crisis and fueling speculation that major central banks will have to rein in their hawkishness to prevent a downturn of harsher economy.
Shares pared a decline as low as 2 per cent for the S&P 500 as the Swiss central bank and financial regulator said Credit Suisse would receive liquidity support if needed, in a bid to stem a decline in confidence around the troubled lender. It also trimmed a benchmark for US heavyweights such as JPMorgan Chase & Co. and Citigroup Inc. losses, but still fell to the lowest level since November 2020. First Republic Bank led a rout in its regional peers in the US after it was snapped out of junk by two major credit companies.
The so-called measure of fear on Wall Street touched its highest level since October after being relatively quiet for most of the year. As investors rushed to the safest corners of the market, the price of gold reversed its previous decline and the dollar rose against all of its developed market peers except the Japanese yen.
Bond yields fell globally as rising concerns about financial stability prompted traders to abandon bets on further rate hikes and start pricing in cuts by the Federal Reserve. They priced in a more than 100 basis point drop in the US policy rate by the end of the year and lowered the odds of further tightening by the Bank of England and the European Central Bank.
Credit Suisse’s banks generally scrambled to protect their exposure to the lender on Wednesday, seizing contracts that would offset them if the crisis that rocked the Zurich-based company worsened. Demand has been so intense for derivatives, known as credit default swaps, that they have jumped to levels that suggest the lender is in deep financial straits — something unseen in a major global bank since at least the throes of the financial crisis.
The renewed wave of banking turmoil drew some alarming notes from prominent voices on Wall Street.
Bulls still control the direction of the XAU/USD gold price, supported by stability above the psychological resistance at $1900 an ounce.We noted the importance of moving towards the resistance level at $1935 an ounce.Stability above it has moved prices towards stronger upward levels that highlight the future of the next historical psychological summit 2000 dollars an ounce.Yesterday’s gains were sufficient to push the technical indicators towards overbought levels, and unless gold gets a new bullish momentum, it may be exposed to profit-taking sales, as happened surprisingly in yesterday’s session.
On the other hand, and for the same time period, the price of gold broke the support level at $1873 an ounce, which is important for the bears to start controlling the trend. The price of gold today will be affected by the level of the US dollar and whether or not investors are willing to take risks due to developments on the ground regarding the future of the US banking system and the extent of the infection spreading to the rest of the world.
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