Gold faces a market correction

利 高い ボラティリティ created by the mini-crisis in the banking sector appears to have subsided this week and gold eased from its one-year high. Following gold’s rapid ascent to the heavens after banking fears funnelled inflows into the precious, it now appears that the shiny metal is experiencing a market correction. In this report, we aim to shed light on the catalysts driving the precious metal’s price, assess its future outlook and conclude with a technical analysis.

Subdued banking tensions boost the precious

The wide uncertainty in the global banking sector even though subsided over the past week as central banks rushed to calm investors’ nerves, kept the market on its feet, remaining on edge despite several contradicting comments from policymakers around the world.

Last week we had Fed Bullard’s speech in which it was stated that “Financial stress has been on the rise in recent days” implying that despite Treasury Secretary Yellen’s attempt to fix her previous remarks to be in line with those of Fed Chair Powel regarding providing ample liquidity to banks, it is still the opinion of Fed Bullard that “These developments have led to volatile trading in banking equities and increases in measures of financial stress.”

This underscores the structural pre–existing problems within the financial industry, pilling onto the fear that the Fed may be afraid to proceed with higher interest rates in fear of “breaking” the banks. Moreover, the shiny metal’s price was positively affected following remarks by Fed Kashkari whose tone appeared to be changing to a more dovish outlook, implying that the balance of power within the FED is now shifting as such they may decide to hold rates rather than increase in the next meeting if fears of contagion keep spreading.

Furthermore, the precious could potentially increase in price as the unscheduled emergency meeting of the Financial Stability Oversight Council, combined with an undisclosed bank tapping the Fed for $60bn in liquidity further supports that the US Banking sector is not strong and resilient.

Market Anticipates Fed’s Next Move: Potential Impact on Gold Price

After last week’s wild swings, the market’s expectations seem to have relatively calmed down as markets anticipate the next decision または news from officials which could provide some insight into future monetary policy meetings. The possibility of the Fed, hiking interest rates further could weaken the price of gold, given the negative correlation of gold’s price with the USD. Should the Fed’s rhetoric switch back to predominantly hawkish, we could see support for USD, leading to outflows from the precious.

テクニカル分析

XAUUSD 4時間チャート

• Support: 1935 (S1), 1900 (S2), 1865 (S3)
• Resistance: 1970 (R1), 2000 (R2), 2050 (R3)

Gold Price: Neutral Outlook Analysis

Gold’s price seems to be moving in a sideways channel after a correction lower from the highs of the 2000 (R1) resistance line and having broken the upwards trendline. Overall, we tend to maintain a neutral outlook as long as the price action remains between the 1935 (S1) and 1970 (R1) levels with the RSI indicator remaining steady at 50. Should the price action breach the resistance line of 1970 (R1) that may allow for gold’s price to test resistance at the 2000 (R2)  level marking a break above the midway Bollinger band range thus potentially moving even higher. On the other hand, should gold’s price stabilization be maintained we may see it making a clean break of the bellow 1935 (S1) support line, aiming if not breaking also the 1900 (S2) support level as at this point we could expect the precious to also break below the lower band of the Bollinger bands thus we may see a downward trendline forming allowing for a bearish scenario to emerge.   

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