Gold (XAU/USD) Price, Charts, and Allaysis
- Low interest rates in the US, fears of an economic recession, and banking problems enhance gold’s attractiveness.
- Will gold consolidate before retesting Wednesday’s high?
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The Fed raised interest rates, as expected, by 25 basis points to the 500-525 range yesterday, but the statement that followed the decision and the press conference sent gold higher as expectations increased that the Fed would no longer raise interest rates. The market is now pricing in the Fed to pause the rate hike cycle before embarking on the rate cut cycle at the end of the third quarter. Markets are already pricing in about 75 basis points of interest rate cuts this year, to the 425-450 target range, with additional cuts next year with the range to 275-300 by the end of September 2024.
Fears of a recession in the US continue to oscillate with commodity growth Oil and Copper taking the hammer. The US oil price fell to $63.73 a barrel. its lowest since early December 2021, while copper is within striking distance of hitting a new low in 2023.
US Oil daily price chart – May 4, 2023
Daily Copper Price Chart – May 4, 2023
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In addition to recession and recession rate forecasts, US regional banks continue to be under severe pressure after the failures of Silvergate, Silicon Valley, and Signature Bank. The newest taxi of this rating is PacWest Bancorp. The California-based midsize holding company saw a decline of more than 40% in after-hours trading as the company said it was looking at strategic options including a possible collapse or sale. . Another US regional bank, Western Alliance Bancorp, fell more than 20% in after-hours trading.
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The combination of lower interest rates on the horizon, recession fears and safe-haven demand sent gold yesterday to an all-time high. The precious metal has been moving higher since its late February low of $1,804 an ounce, with a series of higher lows supporting the move. Yesterday’s decline is likely to be temporary and it looks like gold is ready to retest its ATH and move forward.
Daily gold price chart – May 4, 2023
Chart via TradingView
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