Gold Price Forecast: XAU/USD struggles to remain above $1,940 as fears of US banking crisis trim

  • The price of gold is attempting to keep its auction over $1,940.00.
  • Fears of a banking sector catastrophe and recent weakness in the Dollar Index were the main drivers of the current surge in the price of gold.
  • The probability of the Fed raising rates by 25 basis points are increasing, yet the Dollar Index is performing weakly.

After failing to continue its recovery over $1,946.00 in the Asian session, the price of gold (XAU/USD) has returned to the $1,940.00 support. The price of the precious metal is anticipated to stay flat as investors are likely to make significant trades following the Federal Reserve’s announcement of its interest rate decision (Fed).

It is important to remember that the Gold price is battling to stay on its feet despite the US Dollar Index’s muted performance (DXY). With the failure of three mid-sized banks last week, persistent fears of a banking sector catastrophe in the United States and weakness in the USD Index both contributed to the current surge in the price of gold.

Fears of additional financial instability have been allayed by comments made by US Treasury Secretary Janet Yellen, who said that the Federal Reserve’s new Bank Term Funding facility and discount window loans are helping to provide liquidity to the banking sector. Also, on Tuesday, the announcement gave First Republic Bank’s stock price new life. The appeal of gold as a safe haven previously increased as investors moved their funds to bullions to protect themselves from extreme volatility.

The US Dollar Index (DXY) has been steadily trading around 103.20 as investors applaud the Fed’s increasing odds of raising interest rates by 25 basis points (bp). According to the CME Fedwatch tool, there is an 85% chance that rates will increase by 25 basis points, reaching 4.75–5.00%.

Technical examination of gold
Once the hourly Head and Shoulders chart pattern broke down, the price of gold experienced a perpendicular plunge. The aforementioned chart pattern’s breakdown suggests a bearish reversal following a consolidation trend. The price of gold has decreased to be close to the demand zone, which is between $1,933.90 and 1,938.40.

For Gold bulls, the 20-period Exponential Moving Average (EMA) at roughly $1,950.00 would continue to serve as a barrier.

The downside momentum is still there, as evidenced by the Relative Strength Index (RSI) (14) swinging in the bearish 20.00–40.00 zone.