Gold Price Forecast: XAU/USD en route to challenge record highs

XAU/USD Current price: $2,051.70

• The European Central Bank proceeded with a cautious 25 bps rates hike.
• Troubled US regional banks weigh on the market’s mood.
• XAU/USD maintains the bullish bias and can approach the $2,100 level.

XAU/USD gapped lower with the Asian opening and jumped to $2,078.36 a troy ounce, flirting with record highs before closing the gap. The bright metal retreated towards Wednesday’s close around $2,030 early in Europe but resumed its advance after seesawing between gains and losses during the European Central Bank (ECB) monetary policy decision. The bright metal currently trades around $2,050, helped by falling US Treasury yields putting pressure on the Greenback. At the time being, the 10-year Treasury note yields 3.32%, losing 8 bps in the day, while the 2-year note offers 3.70%, down a whopping 22 bps.

The ECB hiked rates by 25 basis points (bps) as widely anticipated, although some policymakers preferred a 50 bps movement. The accompanying statement refrained from anticipating upcoming decisions, but President Christine Lagarde was a bit clearer on the matter. She noted that an on-hold stance was never on the table and that, given that inflation remains too high, there’s much to be done. By the end of the event, market players rushed to discount at least 2 or 3 more rate hikes.

Lagarde also reiterated that they are not concerned about the banking situation, but the decision to hike at a slower pace was clearly linked to such a crisis. Meanwhile, concerns about the health of the US banking sector hit the mood. Rumours that Western Alliance Bank was considering a potential sale pushed its stock down over 50%, although bank authorities later denied it. Also, First Horizon stock plummeted 40% after agreeing to terminate the TD Bank merger, while another regional bank, PacWest Bank, confirmed on Thursday it’s looking for a financial lifeline. The poor performance of Wall Street underpins XAU/USD.

Attention now shifts to US employment figures. Earlier on Thursday, the United States released  Initial Jobless Claims for the week ended April 28, which rose by 242K, worse than anticipated. Also, Q1 Nonfarm Productivity declined by 2.7%, while Unit Labor Cost in the same period was up by 6.3%. Market players gear up for the April Nonfarm Payrolls (NFP) report on Friday. The US is anticipated to have added 179K new jobs in the month, while the Unemployment rate is foreseen at 3.5%, unchanged from March.

XAU/USD price short-term technical outlook

The XAU/USD pair gapped higher at the opening, and trades above Wednesday’s high at $2,040.35, the immediate support level. According to the daily chart, the risk is skewed to the upside, as Gold further advanced above its moving averages, with the 20 Simple Moving Average (SMA) still lacking clear directional strength at around $2,004, but the longer ones maintaining their upward slopes well below it. Technical indicators, in the meantime, head firmly north within positive levels, reflecting sustained buying interest.

In the near term, and according to the 4-hour chart, XAU/USD is poised to extend its advance. Technical indicators maintain their upward slopes despite being in overbought territory, suggesting the rally could extend in the near term. Furthermore, the 20 SMA accelerated north above the longer ones, also signaling a bullish continuation.  

Support levels: 2,040.35 2,028.60 2,015.30

Resistance levels: 2,059.60, 2,078.40 2,090

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