Gold price recently eased as global policymakers and banks rushed to tame the banking industry fallout. However, the investors aren’t all in and remain cautious as some of the latest market performance resembles the 2008 financial crisis. Apart from the sentiment, the mixed United States data also probe the Gold buyers but allow the XAU/USD to remain firmer amid receding hopes of higher Federal Reserve (Fed) rates.
On Wednesday, Saudi National Bank, the largest shareholder of Credit Suisse Group AG, ruled out another call for additional liquidity and triggered the financial market rout as Credit Suisse is a G-SIB – a global systemically important bank and the drama erupts after the latest fallouts of the US banks, namely Silicon Valley Bank (SVB) and Signature Bank.
However, comments from Saudi National Bank's Chairman, Ammar Al Khudairy, shared by Bloomberg, eased the market’s pain as the bank leader mentioned Credit Suisse Group AG isn’t likely to seek more capital and the bank is generally “sound”. On the same line are the news that major US banks are working with the government to support California based First Republic Bank to avoid liquidity crunch.
The news that Credit Suisse eyes borrowing up to CHF50 billion from the Swiss National Bank (SNB) to strengthen liquidity also gained attention while Reuteres’ news that anonymous sources conveyed that the US banks are less vulnerable to the Credit Suisse debacle helped sentiment too. Additionally convincing the markets were comments from US Treasury Secretary Janet Yellen saying, “"I can reassure the members of the committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them."
It should be noted that the European Central Bank’s (ECB) 50 bps rate hike, matching expectations, also favored the sentiment and allowed the latest rebound in the yields, which in turn probed the Gold buyers.
On a different page, US Weekly Initial Jobless Claims dropped to 192K for the week ended on March 10 versus 205K expected and 212K prior whereas the four-week average figure dropped to 196.5K versus 197.25K prior (revised). Further, Housing Starts jumped to 1.45M in February from 1.321M previous reading and 1.31M analysts’ estimations while the Housing Starts jumped to 1.524M during the said month versus 1.34M expected and 1.339M prior. Additionally, the Philadelphia Fed Manufacturing Survey gauge came in as -23.2 compared to -14.5 consensus and -24.3 prior.
It’s worth mentioning that the Fed fund futures recently bolster the case of the US central bank’s 0.25% rate hike in the next week’s monetary policy meeting.
Amid these plays, Wall Street closed in the green with more than 1.0% gains by each of the benchmark indices whereas US Dollar Index (DXY) marked the negative daily closing.
Looking ahead, the Gold traders should pay attention to the Michigan Consumer Sentiment Index for March and the UoM 5-year Inflation Expectation for clear directions as these are the final clues for the next week’s Fed meeting.
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