Gold Price Forecast: Will XAU/USD rebound from the key 23.6% Fibo level?

Gold price kicked off the week in the red early Monday, as bears look to extend control after a dramatic win last week. Despite looming global banking sector woes and the dovish US Federal Reserve (Fed) expectations, Gold price incurred losses in the previous week, as the United States Dollar (USD) staged a solid recovery in the second half of the week.

United States Dollar sees staggering recovery

Gold price is keeping its corrective mode intact from yearly highs of $2,010, as the US Dollar clings to the recovery gains across the board amid cautiously optimistic markets. Strong US S&P Global Manufacturing and Services PMI data breathed life into the Federal Reserve hawks alongside the US Dollar. Meanwhile, the US Dollar also found another boost from the safe-haven flows, despite the late bounce in Wall Street indices. The United States flash Manufacturing PMI climbed to a still-subdued 49.3 in March from 47.3 in February. The Services PMI rose to 53.8 from 50.6, surpassing the market expectation of 50.5 by a wide margin. Investors shrugged off the disappointing US Durable Goods Orders data, as the US Dollar continued to find support from the banking crisis.

Germany's largest lender, Deutsche Bank,  tumbled nearly 13% after a significant hike in the cost of insuring its bonds against the risk of default, intensifying fears over the European banking sector's resilience in the face of a growing crisis. Risk-off flows underpinned the US Dollar recovery while the late bounce in stocks helped the US Treasury bond yields recover ground at the expense of the Gold price.

Federal Reserve speeches back in focus

Looking ahead, Gold traders will pay close attention to the developments surrounding the global banking crisis, in absence of any top-tier United States economic event. First Citizens BancShares Inc was in advanced talks to acquire SVB from the Federal Deposit Insurance Corp (FDIC), Reuters reported, citing a person familiar with the matter. North Carolina-based First Citizens has around $109 billion in assets and total deposits of $89.4 billion.

Also, the speeches from the Federal Reserve policymakers will be back to the fore after the Fed’s policy decision and the end of the ‘blackout period’. Over the weekend, Minneapolis President Neel Kashkari warned, “bank stress could bring the US closer to recession via a credit crunch.”

Meanwhile, Friday’s comments from Atlanta Fed President Raphael Bostic infused confidence back into the markets, citing that there are “clear signs banking system is safe and resilient,” leading to a bounce in the US stocks.

Gold price technical analysis: Daily chart

Amidst the Bull Flag formation in play, Gold price continued to find support above the 23.6% Fibonacci Retracement (Fibo) level of the March advance, pegged at $1,963.

The 14-day Relative Strength Index (RSI) holds bullish while the 21-Daily Moving Average (DMA) pierced through the mildly firm 50 DMA for the upside on a daily closing basis, confirming a Bull Cross.

These favorable technical indicators continue to add credence to the bullish potential in the Gold price.

Dovish Federal Reserve expectations combined with the renewed fears over the banking sector crisis could rekindle the upbeat momentum, prompting Gold price to resume its uptrend toward the yearly high of $2,010.

However, reclaiming the March 21 high at $1,986 is critical to reversing the corrective downside.

On the flip side, the Gold price correction could gather strength on a daily closing below the abovementioned Fibo level, below which the Bull Flag resistance-turned-support at $1,960 will be tested.

Deeper declines will challenge the critical support at $1,935, which is the confluence of the 38.2% Fibo level, March 21 and 22 highs.