Gold Prices Rise as Banking Crisis Fears Boost Safe-Haven Demand

Bullion Bite
Gold Prices Rise as Banking Crisis Fears Boost Safe-Haven Demand

Gold prices climbed back closer to their six-week high on Friday amid concerns about a full-blown global banking crisis. The safe-haven commodity benefited from the fears of widespread contagion, despite multi-billion-dollar lifelines for troubled banks in the United States (US) and Europe. Large US banks came to the rescue of troubled First Republic Bank and injected $30 billion into the California, San Francisco-based lender on Thursday. This followed Credit Suisse's announcement that it will exercise an option to borrow up to $54 billion from the Swiss National Bank (SNB) to shore up liquidity. However, these developments have failed to boost investors' confidence or ease fears of a full-blown global banking crisis, which is evident from the prevalent cautious market mood.

Furthermore, the collapse of two mid-size US banks, Silicon Valley Bank and Signature Bank, last week forced traders to scale back expectations of more aggressive interest rate hikes by the Federal Reserve (Fed). The markets are now pricing in a nearly 90% chance of a smaller 25 bps lift-off at the upcoming Federal Open Market Committee (FOMC) meeting on March 21-22. This leads to a modest downtick in the US Treasury bond yields and lends additional support to the non-yielding Gold price. Expectations for a less hawkish Fed also prompt fresh selling around the US Dollar, which turns out to be another factor acting as a tailwind for the US Dollar-denominated commodity.

Gold price is poised for the biggest weekly gains since mid-November, indicating that the path of least resistance for the commodity is to the upside. Nevertheless, the XAU/USD remains on track to register its biggest weekly gain since mid-November and seems poised to prolong the recent appreciating move witnessed over the past two weeks or so. Any subsequent move beyond the $1,937-$1,938 region, or the weekly swing high, is likely to confront some resistance near the multi-month top, around the $1,959-$1,960 area touched in February. Some follow-through buying will be seen as a fresh trigger for bullish traders and allow Gold price to aim towards reclaiming the $2,000 psychological mark.

On the flip side, immediate support is pegged near the $1,920-$1,918 horizontal zone, ahead of the overnight swing low, around the $1,908-$1,907 region. This is followed by the $1,900 round figure, which if broken might prompt some technical selling and drag the XAU/USD to the $1,886-$1,885 area en route to the $1,872-$1,871 support, or the weekly low set on Monday. Investors now look to the release of the Michigan US Consumer Sentiment Index for some impetus later during the early North American session on Friday, while the focus will remain on the two-day FOMC meeting, starting next Tuesday.

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