Gold Price Forecast XAU/USD – Dollar Weakness Boosts Gold’s Appeal Amid Rate Hike Uncertainty

Gold prices surged over 1% on Monday, driven by investors seeking a safe-haven asset amid concerns over the fallout from the biggest U.S. bank failure since the 2008 financial crisis.

At 09:22 GMT, April Comex gold is trading $1883.90, up $16.70 or +0.89% and XAU/USD is at $1878.89, up $1.05 or +0.06%.  On Friday, the SPDR Gold Shares ETF (GLD) settled at $173.85, up $3.65 or +2.15%.

Dollar Weakens on Reduced Rate Hike Expectations

The rally was further supported by a significant retreat in the dollar, making zero-yield gold a more attractive option in a low interest rate environment.

Traders have reduced their expectations of a 50-basis-point hike in March, from 70% before the failure of Silicon Valley Bank (SVB) occurred.

Traders Reconsidering Pace of Fed Rate Hikes

Goldman Sachs no longer expects the Federal Reserve to deliver a rate hike on March 22, although it has left unchanged its expectations for hikes in May, June, and July.

Goldman Sachs suggests that there is considerable uncertainty about the path beyond March, and the recent stress in the banking sector has made this more challenging.

Other analysts are warning that the fear of market contagion and stresses may prompt Federal Reserve officials to reconsider the pace of hikes at the upcoming FOMC meeting.

Putting the preservation of financial stability ahead of its fight against inflation would represent a significant shift in policy, which is likely to create more uncertainty.

The revised rate expectations, combined with measures taken by U.S. officials to battle the financial fallout from SVB’s collapse, boosted riskier assets, but gold managed to hold onto most of its gains.

Daily April Comex Gold Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1902.30 will reaffirm the uptrend. A move through the pair of bottoms at $1813.40 and $1810.80 will change the main trend to down.

On the upside, a pair of Fibonacci levels at $1889.50 and $1912.40 are resistance.

On the downside, the nearest support is a 50% level at $1862.40.

Daily April Comex Gold Technical Forecast

Trader reaction to the long-term Fibonacci level at $1889.50 is likely to determine the direction of the April Comex gold futures contract on Monday.

Bullish Scenario

A sustained move over $1889.50 will indicate the presence of buyers. If this creates enough near-term momentum then look for a surge into the short-term Fibonacci level at $1912.40. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $1889.50 will signal the presence of sellers. This could trigger a pullback into support at $1862.40, followed by $1843.40.