Gold Prices Struggle Amid Easing Global Banking Concerns

Key Takeways

• Gold prices edge lower as risk appetite rises
• Strong inflows into ETFs have supported gold
• Investors focus on US economic data and Fed speeches for policy clues

Overview

Gold prices are edging lower on Thursday as easing concerns about the global banking system fed risk appetite and curbed some safe-haven bullion bids.

At 05:36 GMT, June Comex gold futures are trading $1981.30, down $3.20 or -0.16%. The XAU/USD is at $1964.09, up $0.795 or +0.04%. On Wednesday, the SPDR Gold Shares ETF settled at $182.51, down $0.93 or -0.51%.

The dollar index is also higher, making bullion less affordable for buyers holding other currencies or foreign buyers. In the short term, profit-taking as well as reduced fears of further contagion amongst banks could see gold retrace at least 50% of its last rally.

Gold Resilient Despite Retreat From $2,000 Highs, Investors Eyeing Fed Policy Clues and Economic Data Releases

Gold surged above the $2,000 psychological level last week following the collapse of two U.S. lenders earlier this month.

However, the metal has since retreated as authorities intervened with rescue measures, including UBS’ takeover of ailing Credit Suisse and First Citizens BancShares’ acquisition of failed Silicon Valley Bank.

Nonetheless, gold has remained resilient, buoyed by strong inflows into ETFs, including the largest gold-backed ETF, SPDR Gold Shares.

With the Fed now making interest rate decisions on a meeting-to-meeting basis, investors are keeping an eye on Friday’s U.S. Personal Consumption Expenditures data, the Fed’s preferred inflation measure, for further policy clues.

Markets are pricing in a 60% chance of the Fed keeping interest rates unchanged at its May meeting. However, with inflation concerns still present, caution remains.

Investors are also monitoring economic data releases and speeches from Fed officials.

On Thursday, investors will watch for economic data on weekly jobless claims and the gross domestic product. Boston Federal Reserve President Susan Collins, Richmond Fed President Thomas Barkin and Minneapolis Fed President Neel Kashkari are all slated to speak in the afternoon.

Daily June Comex Gold Technical Analysis

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

The nearest resistance is a minor retracement zone at $1992.70 – $2001.90. The closest support is a minor 50% level at $1968.90. If the main trend changes to down then look for the selling to possibly extend into the short-term retracement zone at $1931.00 – $1907.20.

Daily June Comex Gold Technical Forecast

Trader reaction to the minor 50% level at $1968.90 is likely to determine the direction of the June Comex gold futures contract on Thursday.

Bullish Scenario

A sustained move over $1968.90 will indicate the presence of buyers. This could trigger a surge into $1992.70 – $2001.90. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $1968.90 will signal the presence of sellers. This could trigger a quick break into the main bottom at $1953.70. Taking out this level will change the main trend to down with $1931.00 – $1907.20 the next target zone.

Side Notes

This week’s sideways price action suggests investor indecision and impending volatility. Given the shift in the fundamentals, we could be setting up for a near-term plunge into at least $1931.00 – $1907.20.