Gold Surges 2.11% Despite Banking Turmoil; WTI Declines Amid Market Fears

Gold Surges 2.11% Despite Banking Turmoil; WTI Declines Amid Market Fears

March 14, 2023 0 By Alicia Hagen

The XAU/USD started the week off trading at $1,867, with an intraday high clocking the $1,867 low and the $1,913 high. Gold is changing hands at $1,906.70 for the first time since the beginning of February. The commodity saw an uptick of 2.11% despite the ongoing banking sector turmoil.

The significant drop in US yield rates was the primary catalyst in the price of gold. The 10-year yield fell to 3.41%, approaching year-to-date lows of 4.0%. The 2-year yield also clocked its highest since 2008, falling to an intraday level since 2022 at 4.00%.

The decline in yields means that investors can get a better return on their investment in gold than in US bonds, making gold more attractive as an investment option. The collapse of the SVB Financial Group is raising concerns about the banking sector, which has made the Fed reconsider its hawkish stance.

As a result, the likelihood of a 50 basis points rate hike has diminished. Investors eagerly anticipate the release of the US Consumer Price Index (CPI) on Tuesday and the US retail sales report on Wednesday. These releases will provide critical data that investors need to make informed decisions before the Fed meeting at the end of March.

Technical Indicators

From a technical standpoint, the indicators suggest a bullish outlook for the XAU/USD pair in the short term. The 50 SMA and 20 SMA, located at $1,873 and $1,833, respectively, forecast a bull cycle. In addition, the Relative Strength Index (RSI) is currently at 64.970, indicating the potential for bullish momentum.

The resistance levels for XAU range between $1,884 to $1,927.40, which suggests that if the commodity continues to rise, it may encounter some resistant prices at these levels. On the other hand, the support levels are consolidating at $1,841 and $1,799.

WTI Declines on Banking Fears

The US benchmark for crude oil, WTI, experienced a 2% dip following SVB bank’s collapse and Signature Bank’s closure. There are fears that this contagion could spread further, but a recovery in Chinese demand has helped put WTI back on bullish terms. Currently, WTI is trading at $74.54 after hitting a daily high of $77.42.

On Monday, oil prices were in flux as market participants assessed various themes in the market. The WTI price increased due to a weaker US dollar, but the huge stockpiles of oil reserves in the US also played a role in the price movements.

The decline in oil prices came after good US jobs data was released, which showed that the number of jobs added in February exceeded the original prediction by a significant margin.

Technical Analysis of WTI

When the market shifted to a negative stance, WTI fell and reached a daily low of $72.36. The bulls were able to push the prices back up, but they could not reclaim the 20-day Exponential Moving Average (EMA), which is currently hovering at $77.01. As a result, WTI’s bias remained on a downward trend, and according to some investors, it may continue to do so for the rest of the month.

The first support level for WTI would typically hover at the $77.00 mark, with a break below it potentially targeting the February lows of $73.83. If the commodity experiences a further drop, it may reach the psychological price level of $73.00.