GOLD OUTLOOK:
- Gold prices move lower on Thursday, but have rallied significantly over the course of the past week
- Fundamentals remain supportive for defensive assets as the banking sector crisis has not been resolved entirely
- This article looks at key XAU/USD technical levels to watch in the coming sessions
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Gold prices (XAU/USD) are moving slightly lower on Thursday, undermined by the rebound in the equity space, but they have soared in recent days, rising nearly 6% over the past week, after bouncing off technical support located around the 2023 lows.
The precious metal’s gains have been driven by rapidly falling interest rates, with the 2-year U.S. Treasury yield trading near its lowest level since September of 2022 amid a dovish repricing of the Fed’s monetary policy outlook.
The plunge in bond yields can be linked to the turmoil in the U.S. banking sector following the collapse this month of two U.S. regional lenders – Silicon Valley Bank and Signature Bank of New York. The failure of these two entities after a swift and brutal bank run sent tremors across markets, prompting the Federal Reserve to launch emergency measures to shore up depository institutions and prevent systemic risks from triggering a large crisis.
Gold is considered a safe-haven asset, so it tends to perform well in times of heightened uncertainty, high volatility, and financial stress. It is therefore not surprising that it has rallied strongly in the last few trading sessions despite today’s modest pullback.
| Change in | Longs | Shorts | OI |
| Daily | -2% | 2% | 0% |
| Weekly | -27% | 59% | -6% |
Focusing on the outlook, growing financial stability risks will skew gold prices to the upside in the near term, especially if banking woes get worse as that could nudge the U.S. central bank to embrace a more cautious approach. This last scenario could ultimately weaken the U.S. dollar and push Treasury rates lower. There are lots of moving parts right now, so traders carefully monitor the situation with banks.
In terms of technical analysis, XAU/USD is currently sitting below trendline resistance crossing the $1,960 area following its recent advance. If bullish momentum picks up and prices clear this barrier in the coming days, gold could be on its way to retesting its 2023 highs near $1,975. On further strength, the focus shifts to the April 2022 swing high just a touch below the psychological $2,000 level.
On the flip side, if sellers resurface and trigger a meaningful bearish reversal, initial support rests at around the $1,900 area. Below that, we have the 50-day simple moving average near $1,875 and $1,860 thereafter.
