Gold Reaches 6-Weeks High Amid Market Jitters
XAU/USD
+3.64%
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Gold
+3.68%
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Gold prices resumed the advance on Friday, making fresh six-week highs, as the U.S. dollar weakened on the back of declining Treasury yields. In the absence of first-tier events, investors continue to take cues from risk flows and the bond market.
At the time of writing, spot gold, XAU/USD, is trading at $1,950 an ounce, 1.6% above its opening price and is on track to post a 4.5% weekly gain, the third in a row.
Uncertainty regarding the banking sector and how central banks will respond keeps investors on edge, favoring the demand for safe-haven, such as government bonds and the precious metal. The decline in U.S. Treasury yields has helped underpin gold prices. The U.S. 10-year yield fell to 3.45% (-3.6%), while the 2-year rate sits at 4.02% (-3.5%).
Data from the U.S. showed industrial production stagnated in February, while the University of Michigan (UoM) consumer sentiment index deteriorated in March. On a positive note, the UoM 5-year inflation expectation edged slightly lower to 2.8%.
All eyes now turn to the Federal Reserve policy decision next week in the light of the banking crisis, with markets expecting a 25 basis point rate hike this time around.
XAUUSD Daily Chart
The technical outlook remains bullish for XAU/USD on the weekly and daily charts, favoring more gains for the week ahead. Indicators point higher in positive territory, while the 20- and 100-week SMAs have completed a bullish cross. Still, the daily RSI is close to overbought territory, which could bode a consolidation phase before another leg higher.
On the upside, the $1,973 level stands as a critical resistance, where the 78.6% retracement of the $2,070-$1,615 fall stands. Beyond this level, the $2,000 psychological mark is the next barrier to consider. On the flip side, the immediate support level is seen at the $1,890-$1,900 zone, followed by the 20-day SMA at $1,855.
