Gold Prices Slip as Dollar Edges Higher, but Losses Limited by Concerns about Banking System Stability

Key Takeaways

• Gold prices slipped on Friday as the dollar edged higher, but losses were limited by lower Treasury yields.
• Investors are assessing the Federal Reserve’s hints at a potential pause in its rate-hike trajectory.
• Traders are eyeing developments in the global markets that suggest renewed concerns over banking system stability.
• Some traders have suggested that gold prices may consolidate as there could be some profit-taking, unless there is any news related to a banking crisis.

Overview

Gold prices slipped on Friday as the dollar edged higher, but losses were limited by lower Treasury yields. Meanwhile, investors assessed the Federal Reserve’s hints at a potential pause in its rate-hike trajectory. Traders were also eyeing developments in the global markets that suggest renewed concerns over banking system stability.

At 08:51 GMT, June Comex gold futures are trading $2005.70, down $7.60 or -0.38%. The XAU/USD is at $1986.15, down $5.23 or -0.26%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $185.74, up $2.30 or +1.25%.

Gold Prices Could Consolidate Unless Banking Crisis Fears are Reignited

On Thursday, bullion, which tends to be more desirable in a low-interest-rate environment, saw a 2% increase. This came after the Federal Reserve indicated that it might pause further rate hikes following the collapse of two US banks and signaled only one more hike for the year. However, the Fed made it clear that it has no plans to reduce interest rates in 2023. Some traders have suggested that gold prices may consolidate as there could be some profit-taking, unless there is any news related to a banking crisis.

Gold Prices Underpinned Amid Lingering Concerns about Banking System Stability

Safe-haven buying of government bonds is supporting gold on Friday due to lingering concerns about banking system stability. Deutsche Bank shares fell 8% after a sharp increase in its credit default swaps, highlighting fragile sentiment after recent turmoil in the US and European banking sectors.

US Treasury Secretary Janet Yellen attempted to calm investor fears about the health of US lenders and the potential economic consequences of a lending crisis. Yellen is prepared to take further action to protect bank deposits, and the recent hefty drawdown of emergency credit from the Federal Reserve’s discount window suggests that some lenders may be unable to obtain funds elsewhere.

Daily June Comex Gold Technical Analysis

The main trend is up according to the daily swing chart. A trade through $2031.70 will signal a resumption of the uptrend. A move through $1953.70 will change the main trend to down.

The minor range is $2031.70 to $1953.70. The market is currently trading on the strong side of its retracement zone at $2001.90 – $1992.70, making this area support.

The nearest resistance is the April 18, 2022 main top at $2045.80.

Daily June Comex Gold Technical Forecast

Trader reaction to $2001.90 and $1992.70 is likely to determine the direction of the June Comex gold futures contract on Friday.

Bullish Scenario

A sustained move over $2001.90 will indicate the presence of buyers. Taking out the main top at $2031.70 will indicate the buying is getting stronger. This could trigger a surge into the main top at $2045.80. This is a potential trigger point for an acceleration to the upside with $2097.20 the next target.

Bearish Scenario

A sustained move under $1992.70 will signal the presence of sellers. This could trigger a sharp break into $1968.90, followed by $1953.70.