Gold price (XAU/USD) corrected to near $1,970.00 after UBS announced the Credit Suisse rescue plan. The precious metal is gauging a cushion around the $1,970.00 support, however, further correction looks possible.
Investors should be aware of the fact that the market participants were pumping funds into the yellow metal to safeguard themselves from the volatility associated with a potential banking fiasco. A buyout deal by UBS has trimmed fears of global banking turmoil. The buyout deal has sent a signal that central banks are prepared to provide assistance to commercial banks in order to retrieve the confidence of investors.
The US Dollar Index (DXY) is demonstrating a back-and-forth action around 103.80 as the market is preparing for the interest rate decision by the Federal Reserve (Fed), which is scheduled for Wednesday. Analysts at Danske Bank see Fed chair Jerome Powell raising rates by 25 basis points (bps) despite recent turmoil amid banking sector jitters.
Bulk morning gains generated by the S&P500 futures are halved now, portraying that the UBS-Credit Suisse deal is not sufficient enough to deal with the global banking jitters. Negative market sentiment would stay for a period of time as the banking mess is still to show true colors. Meanwhile, the UBS-Credit Suisse deal has trimmed demand for US government bonds, which were being considered as safe-haven. This has pushed the 10-year US Treasury yields higher to 3.46%.
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