- Gold price moves further above $2,675 and books over 0.50% gains for this Thursday.
- Traders favor the previous metal again as an ideal inflation safe haven while global yields surge higher.
- Gold price on its way to $2,680 and set to test possible important technical resistance.
Gold’s price (XAU/USD) turns higher again and enters into a third straight day of gains, after breaking and closing above the 55-day Simple Moving Average (SMA) at $2,654 the previous day. The move comes as yields across the globe start to surge due to inflation concerns. Traders are getting worried that inflation could peak again with all the stimulus plans, fiscal reforms, and tariff levies that President-elect Donald Trump has announced in the past few days and weeks.
On the economic data front, this Thursday, all eyes are on the Federal Reserve (Fed), which has a slew of policymakers lined up to speak. Overnight, the Fed Minutes of the December meeting did not provide any new facts on rate expectations for 2025. Meanwhile, markets will keep an eye on Bitcoin, which has sold off substantially this week while yields are soaring. This creates the same set of parameters as in 2023, which resulted in the bankruptcy of the Silicon Valley Bank.
Daily digest market movers: Fed remains rather sidelined
- US stock markets will remain closed on Thursday, observing a National Day of Mourning in honor of former President Jimmy Carter. The bond market will operate on a shortened schedule, closing early.
- A $22 billion in 30-year Treasury reopening was awarded at 4.913% vs. 4.920% when-issued yield at the 1 p.m. New York time bidding deadline, the highest result since 2007, Bloomberg reports.
- US yields are softening a touch, with the 10-year benchmark at 4.673%, off the fresh nine-month high of 4.728% seen on Wednesday.
- The reshuffle and pushback in rate cut expectations from June to July in the CME FedWatch tool falls in line with the release of the Fed Minutes on Wednesday, where Fed officials confirmed a gradual and possibly longer steady rate before considering cut further, Bloomberg reported.
- At 14:00 GMT, Federal Reserve Bank of Philadelphia President Patrick Harker delivers a speech and participates in an audience Q&A at the Economic Forecast 2025 event organized by the National Association of Corporate Directors New Jersey Chapter.
- Around 17:40 GMT, Federal Reserve Bank of Richmond Thomas Barkin speaks to the Virginia Bankers Association and the Virginia Chamber of Commerce.
- At 18:30 GMT, Federal Reserve Bank of Kansas City President Jeff Schmid delivers a speech about the US economic and monetary policy outlook at an event organized by the Economic Club of Kansas City.
- At 18:35GMT, Federal Reserve Governor Michelle Bowman gives a speech reflecting on “2024: Monetary policy, economic performance and lessons for banking regulation.”
Technical Analysis: Once it breaks, it could go quick
The Gold price surge is making its way towards the resistance in the broader pennant chart formation. From here on out, it might start to get tricky, with $2,680 as a level to look out for. Once that level breaks, Gold prices could quickly sprint away to $2,700 and higher.
On the downside, the 55-day SMA at $2,654 should now be converted into support after it saw a daily close above it on Wednesday. Additionally, the 100-day Simple Moving Average (SMA) at $2,632 is holding again after a false break on Monday. Further down, the ascending trend line of the pennant pattern should provide support at around $2,612, as it did in the past three occasions. In case that support line snaps, a quick decline to $2,531 (August 20, 2024, high) could come back into play as support level.
On the upside, the descending trendline in the pennant chart formation at $2,680 is the first big upside level to watch. Once through there, $2,708 is the next pivotal level to look out for.
XAU/USD: Daily Chart
Banking crisis FAQs
The Banking Crisis of March 2023 occurred when three US-based banks with heavy exposure to the tech-sector and crypto suffered a spike in withdrawals that revealed severe weaknesses in their balance sheets, resulting in their insolvency. The most high profile of the banks was California-based Silicon Valley Bank (SVB) which experienced a surge in withdrawal requests due to a combination of customers fearing fallout from the FTX debacle, and substantially higher returns being offered elsewhere.
In order to fulfill the redemptions, Silicon Valley Bank had to sell its holdings of predominantly US Treasury bonds. Due to the rise in interest rates caused by the Federal Reserve’s rapid tightening measures, however, Treasury bonds had substantially fallen in value. The news that SVB had taken a $1.8B loss from the sale of its bonds triggered a panic and precipitated a full scale run on the bank that ended with the Federal Deposit Insurance Corporation (FDIC) having to take it over.The crisis spread to San-Francisco-based First Republic which ended up being rescued by a coordinated effort from a group of large US banks. On March 19, Credit Suisse in Switzerland fell foul after several years of poor performance and had to be taken over by UBS.
The Banking Crisis was negative for the US Dollar (USD) because it changed expectations about the future course of interest rates. Prior to the crisis investors had expected the Federal Reserve (Fed) to continue raising interest rates to combat persistently high inflation, however, once it became clear how much stress this was placing on the banking sector by devaluing bank holdings of US Treasury bonds, the expectation was the Fed would pause or even reverse its policy trajectory. Since higher interest rates are positive for the US Dollar, it fell as it discounted the possibility of a policy pivot.
The Banking Crisis was a bullish event for Gold. Firstly it benefited from demand due to its status as a safe-haven asset. Secondly, it led to investors expecting the Federal Reserve (Fed) to pause its aggressive rate-hiking policy, out of fear of the impact on the financial stability of the banking system – lower interest rate expectations reduced the opportunity cost of holding Gold. Thirdly, Gold, which is priced in US Dollars (XAU/USD), rose in value because the US Dollar weakened.
Source: https://www.fxstreet.com/news/gold-price-draws-attention-amidst-swelling-global-inflation-woes-202501091153