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Gold Technical Analysis: Exposed to Profit-taking Sales


The price of gold extended its gains and the price of copper fell as the collapse of the Silicon Valley bank soured risk sentiment and curbed expectations of further rate hikes by the Federal Reserve. The XAU/USD gold price moved in an upward path in the last three trading sessions. The strongest was the session at the beginning of this week, as the yellow metal price jumped towards the resistance level of $1915 an ounce, its highest in five weeks. It is stable near it at the time of writing the analysis.

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Overall, the second-largest collapse of a US lender in history raised concerns about potential spillovers across the financial system and prompted US officials to take action to protect depositors’ funds on Sunday. At the same time, global stock markets fell on Monday, with the price of copper dropping to its lowest level in two months as it tracks the broader movement in risky assets, while the price of gold crossed the psychological upward barrier of $1,900 an ounce.

The bank’s failure has also shifted expectations for further increases by the Fed, with swaps markets now seeing no further increases this year as the most likely outcome. Accordingly, the benchmark 10-year Treasury yields fell to their lowest levels in more than a month, which supports the bullion market. Commenting on performance and influence factors. “With nearly two-year yields down 1 percent in less than a week, and the market priced away from the prospect of a rate hike, the price of gold should rally,” said Ole Hansen, commodities analyst at Saxo Bank A/S. and “Gold is the most sensitive commodity to rates and the dollar.”

It is a quick turnaround for the XAU/USD gold price, which has now jumped beyond the 50-day moving average, indicating a change in momentum. The price of the yellow metal rose 2 percent on Friday after US jobs data indicated an easing of inflationary pressures in the labor market.

For her part, StoneX analyst Rhona O’Connell wrote in a note: “Any mounting distress in the financial sector will almost certainly see an initial sell-off of gold to increase liquidity, followed by a new safe-haven purchase.” Its perceived role in the market is now likely to be due to hedging risk as a major component.

The US consumer price index due on Tuesday may also influence the next move of the Federal Reserve. Investors will be watching for signs of fear spreading to other commercial banks. Also in the metals market, the price of copper fell 2.6 percent on the London Metal Exchange to the lowest level since January 6, reversing early gains as equity markets turned lower.

  • The stability of the XAU/USD gold price will continue to be above the psychological resistance at $1900, stimulating the bulls’ control over the general trend.
  • The talk between the markets and analysts may increase the fate of the historic summit of $2000 an ounce, if the US dollar continues to decline and breaks the $1935 resistance.
  • The continued collapse of the US banking system and the spread of infection globally will help gold achieve more record gains, taking into account that the recent gains have moved the technical indicators towards overbought levels.

The gold price may be exposed to profit-taking sales in the event that confidence in the markets returns as a result of what happened recently, in addition to the global central banks continuing to tighten their policies. On the other hand, breaking the support level at $1870 an ounce is important for the bears to control again.

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