Gold Prices Fluctuate Amidst Bank Fears and Fed Rate Pause Bets

Key Takeaways

• Gold prices hit $2,000 due to bank contagion fears and Fed rate pause bets
• Stronger dollar and stock market rebound pressured gold
• Fed officials focused on lowering inflation through another rate increase despite bank collapse events

Overview

Gold had a volatile week, hitting above $2,000 due to bank contagion fears and bets on a Fed rate pause. On Friday, a stronger dollar made gold pricier for foreign buyers. A firmer dollar and stock market rebound pressured gold, but it should receive support from macro factors. Earlier in the week, rescue measures calmed bank contagion fears.

On Friday, June Comex gold settled at $2001.70, down $11.60 or -0.58%. The XAU/USD finished at $1978.97, down $12.41 or -0.62%. The SPDR Gold Shares ETF (GLD) closed the week at $183.65, down $2.09 or -1.135.

On Friday, European banking shares like Deutsche Bank and UBS were hit by concerns that regulators and central banks had not contained the worst shock to the sector since the 2008 financial crisis. This also impacted gold prices, which tend to rise with concerns about undercapitalized banks.

However, Fed officials noted that financial stress did not appear to be worsening at their policy meeting this week, allowing them to focus on lowering inflation through another interest rate increase. The central bank went on to raise rates by a quarter of a percentage point but indicated that it was close to pausing.

Federal Reserve Officials Conclude Recent Bank Collapse Does Not Undermine Confidence in US Banking System

Federal Reserve officials concluded that the recent bank collapse and other events did not undermine confidence in the strength of the US banking system.

Three regional Fed bank presidents dismissed the collapse of Silicon Valley Bank as a “quirky situation”.

St. Louis Fed President James Bullard raised his estimate of how high the Fed’s benchmark overnight interest rate needs to rise.

Other policymakers agreed that there was no broadening crisis that would require the Fed to back away from another rate increase. The Fed has a 2% inflation target, and its main indicator of inflation is currently running at double that pace.

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.

Friday’s minor closing price reversal top suggests momentum may be getting ready to shift to the downside.

The first minor range is $2031.70 to $1953.70. Its retracement zone at $2001.90 – $1992.70 is minor support.

The second minor range is $1906.00 to $2031.70. Its 50% level at $1968.90 is the next support.

The short-term range is $1830.20 to $2031.70. If the main trend changes to down then its retracement zone at $1931.00 – $1907.20 becomes the primary downside target.

Daily June Comex Gold Technical Forecast

Trader reaction to the minor 50% level at $1992.70 is likely to set the tone in the June Comex gold futures market early Monday.

Bullish Scenario

A sustained move over $1992.70 will indicate the presence of buyers. Overtaking the Fibonacci level at $2001.90 will indicate the buying is getting stronger. This could create the momentum needed to trigger a surge into the main top at $2031.70, followed by the April 18, 2022 main top at $2045.80.

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 the main bottom at $1953.70. Taking out this level will change the main trend to down.