Gold Price Rallies As SVB Failure Casts Doubt for Fed Rate Hikes

The price of gold carves a series of higher highs and lows following the failed attempt to test the February low of $1805, and the failure of Silicon Valley Bank (SVB) may continue to heighten the appeal of bullion as market participants scale back bets for higher US interest rates.

The price of gold trades back above the 50-day SMA as it rallies to a fresh monthly high, and the precious metal may once again track the positive slope in the moving average as fears surrounding the US banking sector drags on the risk-taking behavior.

As a result, the threat of contagion may lead to a flight to safety even as the Federal Reserve announces that it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors, and it remains to be seen if the Federal Open Market Committee will adjust the forward guidance for monetary policy as central bank is slated to release the updated Summary of Economic Projections on March 22.

Until then, the price of gold may continue to retrace the decline from the February high as the CME FedWatch Tool now reflects a greater than 90% probability for a terminal rate of 4.75% to 5.00%, and developments coming out of the US may keep the precious metal afloat as the update to the US Consumer Price Index is anticipated to show slowing inflation.

The price of gold trades back above the 50-day SMA after reversing ahead of the February low, and bullion may once again track the positive slope in the moving average as it breaks out of the opening range for March.

The recent series of higher highs and lows in the price of gold may push the Relative Strength Index into overbought territory, with a move above 70 in the oscillator likely to be accompanied by a further advance in price hike the behavior seen earlier this year.

The move above $1897 brings the $1928 region on the radar, with a move above the February high opening up the $1973 area.
However, lack of momentum to test the $1928 region may undermine the recent rally in the price of gold, with a move below the 50-day SMA raising the scope for a run at $1859.