After a day of solid two-way market activity, gold is back in the red zone early Thursday. The gold price is falling even as the US dollar (USD) is fading its rebound, as market anxieties appear to be settling following the Credit Suisse crisis that erupted on Wednesday.
Eyes on the European Central Bank makes a rate decision.
Gold dealers are now anticipating the European Central Bank’s (ECB) monetary policy statements for more trading momentum.
Markets are currently putting in a 20% possibility of a 50-basis point (bps) ECB rate rise on Thursday, down from a roughly 90% chance the day before. If the ECB surprises with a 50-basis point raise, gold might see a new run higher as concerns about a financial crisis grow.
Yet, a 25-basis point rate rise from the ECB might suggest that the central bank remains worried about tightening financial market conditions, implying a 25-basis point rate hike from the Fed next week. In any situation, the gold price will benefit, but the magnitude of the gains will be determined by US Dollar values and yield dynamics.
Gold Technical Outlook
The gold price smashed over the important barrier of $1,919 on February 3, but failed to close above it on a daily basis.
The 14-day Relative Strength Index (RSI) remains positive above the midline, suggesting that there is more potential to the upside.
A daily close over $1,919 will start a new uptrend towards the year-to-date highs of $1,960. At first, the previous day’s high of $1,937 may put the bearish commitments to the test.
However, the immediate downside might be challenged at the $1,900 level, below which the $1,895 low from Tuesday could enter the picture. Farther south, the previous day’s low of $1,886 will help gold buyers.
To put it gently, they’re down to their final line of defense. The 50-day moving average (DMA) is bullish at $1,877.
Nevertheless, the gold price remains a ‘buy the dips’ strategy despite global financial sector uncertainties.
