- The realization is growing that more ominous clouds are gathering over the US economy, causing new anxiety for investors.
- Despite some better-than-expected results from the first big tech crowd to report, the dark picture for US consumer confidence added to concerns about lower spending ahead.
- Accordingly, the price of the US dollar declined, and therefore the XAU/USD (gold) price had a good opportunity to bounce back to the upside again with gains towards the resistance level of $2009 an ounce yesterday, recovering from selling operations at the beginning of the week’s trading that pushed it towards the support level of $1972 an ounce.
All in all, the worry mill continues to grind over the banking crisis, with First Republic Bank looking fragile after its shares crashed to a record low. The regulatory cavalry is likely to be poised to step in unless more financing can be raised from major lenders. On the other hand, concerns about the accumulated problems of the global economy keep pressure on oil prices.
Brent crude is hovering around $81 a barrel, down 7% from its highs earlier in the month, as lower energy demand is expected amid ever-tightening financial conditions. Given the turmoil we've seen in the banking sector in recent weeks, even in the past 24 hours with the First Republic's problems coming to mind, it's gratifying to see Standard Chartered beat earnings expectations and post a very optimistic outlook.
Overall, higher interest rates continue to act as a headwind to earnings, but arguably more important in the current climate are the strong customer deposit numbers and credit impairment charges of just $26 million, well below market expectations. This was a flexible set of findings that should help allay some concerns that the issues are systemic across the sector.
The acquisition rumors still seem fresh, and there's certainly likely more chatter to come. However, the huge footprint means any deal will be riddled with regulatory hurdles, which could ultimately deter potential buyers from getting in on the whole thing.
Alphabet and Microsoft's earnings beat estimates, as advertising spending remained resilient to the Google owner. And both giants have benefited from the uptick in business for their cloud computing arms, as companies fine-tune spending to ensure they are in a fight to meet the demands of the AI revolution.
Microsoft is ahead, especially given the integrated capabilities of its other services. However, PC sales fell 9% year-on-year, pointing to the difficulty in selling expensive items, especially to consumer and product companies that have sprung up during the pandemic.
Shoppers are expected to tighten cash chains even further, according to the US Conference Board's Consumer Sentiment Index, which shows sentiment has fallen to its lowest level since July. As Americans become more pessimistic about what the job market will look like in 6 months, spending plans are being scaled back, especially for house moves, expensive items like cars and appliances, as well as vacations. However, a brighter perspective is emerging in Europe, where German consumers are becoming more optimistic about the horizon ahead.
The easing of the energy crisis and the sluggish path of inflation will help lift the mood, but it remains subdued compared to pre-pandemic times and the banking crisis continues to weigh on investors' minds.
XAU/USD (gold) Technical Outlook
There is no change in my technical point of view, as the XAU/USD (gold) price moved around and above the psychological resistance of $2000, which supports the bulls' control over the trend and warns of a strong upcoming move if the US dollar continues to weaken and investors' fears increase. The closest targets for the bulls are currently 2015 and 2027, respectively.
The last level is important to return to the vicinity of resistance at $2048 an ounce, the highest price level during the year 2023 again. On the other hand, and for the same period of time, the bears’ control over the XAU/USD (gold) price will be important in the event that the price of the yellow metal moves towards the support levels of 1968 and 1950 dollars, respectively. The reaction to the results of the US economic data will have a strong and direct reaction on the price of the dollar and, accordingly, on the price of gold.
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