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Gold Price Forecast: XAU/USD hits multi-week high on risk-off, falling US bond yields

by Elena Martin   ·  March 18, 2023  
On Friday, the gold price saw a significant uptick and reached its highest since February. Investors’ anxiety about a worldwide financial crisis boosts the safe-haven XAU/USD. Expectations for a less aggressive Fed, plunging US bond rates, and a lower USD offer a further boost.

After the day’s aimless price movement, the gold price attracted new offers and maintained its intraday upward trend during the early North American session. In the most recent hour, the XAU/USD surged to a new six-week high in the $1,946 area, and it is still on course to post its greatest weekly increase since mid-November.

Demand for conventional safe-haven assets increases, which supports the price of gold. This is due to a fresh wave of the global risk-aversion trade, as seen by increased selling on the equities markets. Investors are still attempting to establish if the danger of a full-blown global financial crisis has been tamed and remain anxious about the broad contagion despite multibillion-dollar lifelines for weak banks in the United States (US) and Europe. Also, the risk attitude is negatively impacted by impending recession threats, which pushes investors to the precious metal as a haven.


Another element favoring the non-yielding Gold price and maintaining support for the powerful intraday surge is the sharp decrease in US Treasury bond rates. Lower US bond rates result from the anti-risk sentiment and growing expectations for a lesser 25 basis point (bps) rate increase at the forthcoming Federal Open Market Committee (FOMC) meeting on March 21–22. When two mid-sized American banks, Silicon Valley Bank and Signature Bank, failed last week, investors now seem confident that the Fed will take a less aggressive approach.

The US Dollar (USD) is down for a second consecutive day as the likelihood of the US central bank adopting more aggressive policy tightening measures diminishes along with falling US bond rates. A lower US dollar gives the price of gold a further lift, bringing some short-term trade pauses around the previous weekly/monthly high in the neighborhood of $1,937. This may have prepared the ground for a further short-term upward movement into the $1,959–$1,960 range or the multi-month peak in February.