Gold Price Forecast: XAU/USD rises on persistent banking jitters

• Gold price bulls come alive as safe-haven demand rockets on global banking fears.
• UBS takeover of troubled Credit Suisse only temporarily calms markets.
• Gold gains from subdued US Dollar as bets for next Fed hike fade.

Gold price is rising on the back of safe-haven demand as fears around global banking contagion persist. XAU/USD is trading at $2,007 per Troy Ounce at the time of writing, up almost 1% on the day. It is in a short-term uptrend, with the odds favoring more upside to come.

Gold news: UBS takeover fails to calm markets

A deal to enable rival UBS to take over troubled lender Credit Suisse over the weekend temporarily reassured investors and stabilized sentiment but relief was temporary. Fears around wider banking stability continue to propel investors into assets seen as safe. Stage directions: Enter Solid Gold.

The collapse of Credit Suisse and others, such as Silicon Valley Bank (SVB) and First Republic Bank before it, was triggered by a drying up of liquidity. The rise in inflation and interest rates to combat it has led to a fall in the value of the extensive government bond holdings of many banks, reducing the value of their assets. This, combined with a fall in bank deposits, caused a banking liquidity crunch. 

US Dollar loses momentum as Fed rate bets fall

Gold price has also gained upside from a temporary plateauing of the value of the US Dollar – which it tends to move inversely to, because Gold is priced in Dollars. Expectations that the Federal Reserve will reign in its aggressive interest rate hiking policy – as fears even higher interest rates could exacerbate the banking crisis – have taken the wind out of the US currency’s sails. 

If bets for future interest rate hikes from the Fed continue to decline, this will have a negative impact on the US Dollar and support Gold price. That said, USD also benefits from safe-haven demand, so if the crisis worsens this will provide a back draught.  

Gold price technical analysis

Gold price resumes the rally that started at the beginning of March when Gold found a floor at circa $1,805. Since then, it has climbed over $200 to above $2,000. The precious metal is in a short and medium-term uptrend. Upside momentum is strong, unless it turns on a dime, it should continue rising. 

The elevated Relative Strength Index (RSI) on the daily chart suggests that it may be a little late to buy Gold. At 77, RSI is already in the overbought section above 70. Better to wait until it pulls back before getting in again. There are signs on lower time frames, such as the 4-hour chart, that a pull-back may be underway. 

From a technical perspective, the next upside target is at $2,069 at the March 2022 highs. A sudden reversal and move below $1,887, on the other hand, would bring into doubt the validity of the uptrend and increase the chances a new bear trend might be starting. 

Gold price: Daily Chart