The collapse of Silicon Valley Bank triggered a sharp drop in the US dollar and sparked safe-haven demand, rescuing gold prices from a slump. The price of gold has surged for three consecutive days, breaking through $1,900 per ounce, and if it confirms a sustained breach above this level, it could open the door to reaching February's high of $1,960.
Last Tuesday, gold prices were under immense downward pressure as Federal Reserve Chairman Powell testified before the Senate, saying that the Fed was prepared to accelerate the pace of interest rate hikes, and that terminal rates may be higher than previously expected. This statement fueled expectations of higher interest rates, shifting the market's focus from betting on a 25-basis-point rate hike in March to a 50-basis-point rate hike, and raised the expected terminal rate of the Fed to over 5.7%.
Under these high expectations of interest rate hikes, the US dollar index surged to a near three-month high last Tuesday, causing gold prices to suffer a heavy blow, plunging over $30 per ounce, threatening to break below $1,800. However, just as gold prices were on the brink of collapse, a major black swan event saved the day. Last Thursday, media reports revealed that Silicon Valley Bank had suffered huge losses in US bond and mortgage-backed securities trading due to a decline in client deposits, and sought to raise $2.25 billion through the issuance of common and convertible preferred shares to avoid a liquidity crisis.
The crisis at Silicon Valley Bank changed market expectations for Fed interest rate hikes, causing the US dollar to fall and completely giving up the gains made in response to Powell's congressional testimony, and consequently, the price of gold rebounded and strengthened. On Friday, US non-farm payroll growth exceeded expectations, but the market was more sensitive to the unexpected rise in the unemployment rate and weaker-than-expected wage data, causing expectations of interest rate hikes to cool further and gold to surge $36 per ounce.
Although US officials announced emergency lending facilities and deposit guarantees to stabilize market sentiment after the collapse of Silicon Valley Bank before the Asian market opened on Monday, which had a soothing effect on the market, the US dollar continued to fall, boosting the price of gold. However, this improvement in sentiment was short-lived, as panic swept back into the market during the European session, driving up demand for safe-haven assets and intensifying the upward trend in gold prices. Meanwhile, the US dollar remained weak, continuing to support the price of gold.
With the combination of these two positive factors, the price of gold has broken through the $1,900 level during the US morning session. If this market trend continues, the upward momentum of gold prices is expected to strengthen further. Technical analysis of gold prices shows that breaking through the 1900 level would provide further upward momentum. The key level in mid to late January this year has now been surpassed, indicating further upside potential. If this expectation is met, the next target could be the range of $1,950 to the February high of $1,960. If there is a short-term correction, attention should be paid to the 1890-1900 range, which is expected to have turned into support and limit downside potential.
Last Tuesday, gold prices were under immense downward pressure as Federal Reserve Chairman Powell testified before the Senate, saying that the Fed was prepared to accelerate the pace of interest rate hikes, and that terminal rates may be higher than previously expected. This statement fueled expectations of higher interest rates, shifting the market's focus from betting on a 25-basis-point rate hike in March to a 50-basis-point rate hike, and raised the expected terminal rate of the Fed to over 5.7%.
Under these high expectations of interest rate hikes, the US dollar index surged to a near three-month high last Tuesday, causing gold prices to suffer a heavy blow, plunging over $30 per ounce, threatening to break below $1,800. However, just as gold prices were on the brink of collapse, a major black swan event saved the day. Last Thursday, media reports revealed that Silicon Valley Bank had suffered huge losses in US bond and mortgage-backed securities trading due to a decline in client deposits, and sought to raise $2.25 billion through the issuance of common and convertible preferred shares to avoid a liquidity crisis.
The crisis at Silicon Valley Bank changed market expectations for Fed interest rate hikes, causing the US dollar to fall and completely giving up the gains made in response to Powell's congressional testimony, and consequently, the price of gold rebounded and strengthened. On Friday, US non-farm payroll growth exceeded expectations, but the market was more sensitive to the unexpected rise in the unemployment rate and weaker-than-expected wage data, causing expectations of interest rate hikes to cool further and gold to surge $36 per ounce.
Although US officials announced emergency lending facilities and deposit guarantees to stabilize market sentiment after the collapse of Silicon Valley Bank before the Asian market opened on Monday, which had a soothing effect on the market, the US dollar continued to fall, boosting the price of gold. However, this improvement in sentiment was short-lived, as panic swept back into the market during the European session, driving up demand for safe-haven assets and intensifying the upward trend in gold prices. Meanwhile, the US dollar remained weak, continuing to support the price of gold.
With the combination of these two positive factors, the price of gold has broken through the $1,900 level during the US morning session. If this market trend continues, the upward momentum of gold prices is expected to strengthen further. Technical analysis of gold prices shows that breaking through the 1900 level would provide further upward momentum. The key level in mid to late January this year has now been surpassed, indicating further upside potential. If this expectation is met, the next target could be the range of $1,950 to the February high of $1,960. If there is a short-term correction, attention should be paid to the 1890-1900 range, which is expected to have turned into support and limit downside potential.
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