Bullish vibes retained for gold
Posted on Mar 28, 2023 at 12:00 am
Financial markets were notably stressed by the news of Silicon Valley Bank (SVB),1 followed by news of the Credit Suisse takeover by UBS. In the U.S., there have been decisive moves by the Federal Deposit Insurance Corporation (FDIC)2 and the Federal Reserve (Fed),3 but market confidence has been shaken, and we have witnessed a flight to safety.
The US central bank raised interest rates yet again on Wednesday but notably toned down its ‘forward guidance.’ The Fed further stated that there will be just one more rate hike in this year.
Gold rate hikes, subduing dollar along with ongoing tensions in Ukraine, the bullish vibes are expected to retain for the most safe haven lot of all metals - Gold.
While the bullish vibe remains entrenched in the heart of the gold market, Friday's action feels sloppy early on and weak global equities might foster long profit-taking by cautious traders.
However, there is a measure of concern toward the European banking sector in the market this morning and that could rekindle aggressive flight to quality buying into the US close today. On the other hand, given the disappointing European S&P global manufacturing PMI readings, lower equities, and a stronger dollar there is some early incentive to bank long profits this morning.
However, from a longer-term perspective the potential for inflation to regain momentum remains higher than at the beginning of the week and that should leave the trend pointing up. Our intermediate target for gold price is $2,100 and see support at $2000, with lower and very critical support seen at $1984.40.
As indicated earlier in the week, the silver market charts are not as overbought as the gold rate charts and upside action over the past two weeks has been very orderly and therefore seems capable of continued stepwise gains. Therefore, we think the silver market has a solid foundation around $22.41, with the potential for a run toward $24.00 next week.
