The gold market began the week in the negative early Monday, as bears seek to extend control following a spectacular success last week. Despite imminent global banking sector difficulties and dovish US Federal Reserve (Fed) predictions, gold price fell last week as the US Dollar (USD) mounted a robust comeback in the second part of the week.
In a cautious market, the US dollar clings to its gains, as US Treasury bond rates rise.
While the US Dollar clings to recovery gains across the board amid cautiously hopeful markets, the gold price is maintaining its corrective mode from yearly highs of $2,010. Positive US S&P Global Manufacturing and Services PMI data fueled Federal Reserve hawks as well as the US Dollar.
Yet, despite the lateness, the US Dollar received additional lift from safe-haven flows. Wall Street indexes have recovered. The flash Manufacturing PMI in the United States increased from 47.3 in February to 49.3 in March. The Services PMI increased to 53.8 from 50.6, much above the market consensus of 50.5. Investors ignored the poor US Durable Goods Orders report, as the US Dollar benefited from the financial crisis.
Deutsche Bank, Germany’s largest lender, fell nearly 13% after a huge increase in the cost of insuring its bonds against default risk, heightening concerns about the European banking sector’s resilience in the face of a mounting crisis. Risk-off flows supported the US Dollar’s rebound, but the late rally in equities helped US Treasury bond rates regain ground at the expense of the Gold price.
Gold Technical Analysis
Gold price continued to find support above the 23.6% Fibonacci Retracement (Fibo) level of the March gain, which was set at $1,963.
On a daily closing basis, the 14-day Relative Strength Index (RSI) remains bullish, while the 21-Daily Moving Average (DMA) penetrated through the modestly robust 50 DMA towards the upside, confirming a Bull Cross.
These positive technical indications continue to support the gold price’s bullish potential. Dovish Federal Reserve predictions, along with increased concerns over the banking sector crisis, might revive the bullish momentum, causing the gold price to resume its upward trajectory towards the yearly high of $2,010.
Recovering the March 21 high of $1,986 is crucial to reversing the corrective downtrend.
On the other hand, if the gold price falls below the aforementioned Fibo level on a daily basis, the Bull Flag resistance-turned-support level at $1,960 will be challenged.
Further drops will put pressure on the important support level of $1,935, which is the intersection of the 38.2% Fibo level and the March 21 and 22 highs.
