Gold Prices Testing Multi-Month High Amidst Uncertain Banking Environment

Key Takeaways

• Gold futures hit multi-month high 
• UBS purchase of Credit Suisse stabilizes market sentiment
• Speculators remain optimistic about gold’s future performance
• Fragile banking environment creates uncertainty for gold prices
• Potential interest rate hike and strong US dollar may impact gold prices.

Overview

Gold futures rose to a new multi-month high despite rising U.S. Treasury yields and a stronger U.S. Dollar. The early price action is choppy, however, as market sentiment improved after Swiss lender UBS agreed to purchase Credit Suisse for $3.23 billion and assume up to $5.4 billion in losses, backed by a massive Swiss guarantee.

The move was seen as a rescue effort to stabilize global financial markets, leading to a decrease in safe-haven flows in gold. Speculators remained optimistic about the future performance of gold and viewed the current situation as a potential buying opportunity.

Gold Faces Uncertain Future Amidst Fragile Banking Environment.

However, the risk environment remains fragile, and market participants are uncertain if recent measures taken by authorities are enough to prevent further banking crises.

Additionally, the market anticipates a 25 basis point interest rate hike by the U.S. Federal Reserve, which may increase the opportunity cost of holding gold. As a hedge against economic uncertainties, gold’s appeal may diminish as interest rates rise.

Furthermore, a strengthening of the U.S. Dollar will make bullion more expensive for overseas buyers, which may exert downward pressure on gold prices.

At 05:26 GMT, June Comex Gold futures are trading at $1997.00, up $6.80 or +0.34%, down from an earlier high of $2011.20. Meanwhile, XAU/USD is at $1975.61, down $1.505 or -0.08%. On Friday, the SPDR Gold Shares ETF (GLD) settled at $183.74, up $5.17 or +2.90%. Despite experiencing its largest weekly increase in three weeks, gold’s safe-haven appeal declined due to the improving risk sentiment.

Daily June Comex Gold Technical Analysis

The main trend is up according to the daily swing chart. A trade through $2011.20 will signal a resumption of the uptrend. A move through $1830.20 will change the main trend to down.

The minor trend is also up. A trade through $1906.00 will change the minor trend to down. This will shift momentum to the downside.

The minor range is $1906.00 to $2011.20. Its pivot at $1958.60 is support. The nearest resistance is the April 18, 2022 main top at $2045.80.

Daily June Comex Gold Technical Forecast

Trader reaction to $1990.20 is likely to determine the direction of the June Comex gold futures contract on Monday.

Bullish Scenario

A sustained move over $1990.20 will indicate the presence of buyers. Taking out $2011.20 will indicate the buying is getting stronger. This could trigger a surge into $2045.80.

A trade through 2045.80 will reaffirm the uptrend with the next target the March 8, 2022 main top at $2097.20.

Bearish Scenario

A sustained move under $1990.20 will signal the presence of sellers. This could trigger a steep break into $1958.60. Since the main trend is up, buyers could come in on a test of this level.

Side Notes

A close under $1990.20 will form a closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.