XAU/USD is approaching the $1,900 level as US Treasury 2-Year rates decline. Over the last three trading days, gold price bulls have been on the offensive. The market is cautiously anticipating the US CPI announcement.
In the previous four days, XAU/USD has surged higher and is now up almost 1% for the day. Dropping US Treasury rates have driven up the price of gold as the market prepares for any potential 50 basis point rate rise for the FOMC meeting in March.
Due to the Federal Reserve’s (Fed) and US Treasury’s intervention in the financial sector to save Silicon Valley Bank (SVB) and Signature Bank, XAU/USD profited from a weaker US Dollar earlier in the Asian session.
The market has seen the SVB fallout due to the United States (US) rising borrowing costs, damaging financial health.
Given that the price of gold is inversely connected with US Treasury rates and that gold is sensitive to the shorter end of the yield curve, the XAU/USD pair displays some significant upward momentum in the aftermath of a dropping yield.
On Friday, after the announcement of the Nonfarm Payrolls (NFP), the shorter end of the yield curve saw a significant decline. The number of new jobs was larger than anticipated, yet the unemployment rate increased to 3.6%. The market has seen Friday’s NFP as being cautious and chaotic. The US Dollar, as well as equities systems throughout the world, are under a lot of pressure as a result of the fact that rates are falling globally, particularly at the shorter end of the US Treasury yield curve.
The US economy is scheduled to release the Consumer Price Index (CPI) data on Tuesday, but the market is not looking forward to the upcoming CPI event. The market dynamics will probably remain unstable until the FOMC Meeting on March 22 since we are now in the Fed’s “blackout” phase.
Gold price key levels to monitor
The price of gold is attempting to surpass March’s peak of $1,894 per ounce. The price will go towards the important psychological level of $1,900 with a clear break above. Any further decline will probably be restrained around Monday’s low of $1,866.