Gold price is on the rise again, what to expect next?

Yesterday's trading saw gold futures stabilize above the psychological resistance level of $2,000 an ounce due to renewed investor concerns caused by new banking turmoil. The collapse of First Republic caused other regional banks, including PacWest Bancorp, to see their shares plunge, benefiting the price of gold due to the weakness of the US dollar and signs of a slowdown in the economy.

During the trading session, the XAU/USD gold price rose from the $1978 support an ounce to the $2019 resistance an ounce. Gold is expected to continue gaining from the announcement of central banks led by the US Federal Reserve, which will strongly impact the price of the US dollar and investor sentiment. The XAU/USD gold price has risen about 11% since the beginning of the year 2023, while the price of silver is up nearly 6%.

Shares of PacWest have dropped as much as 36%, causing the New York Stock Exchange to halt trading multiple times due to extreme volatility. Other regional institutions, such as the Western Alliance, and regional bank exchange-traded funds (ETFs) have also experienced losses. Investors are concerned about the long-term viability of small and medium-sized regional banks, especially with new regulations and more bank failures.

KBW analyst David Conrad believes banks with assets between $500 billion and <$60 billion are the clearest winners in the New World Order. Banks in the shrinking range of 80-$120 billion may need to "avoid new regulations or engage more actively in mergers and acquisitions to increase scale and absorb regulatory costs." JPMorgan Chase now controls about $2.5 trillion in deposits, 14% of all deposits in the country.

The US Federal Reserve may hit the pause button in its tightening cycle or continue to raise interest rates at the May FOMC meeting, which ends on Wednesday. The US Treasury bond market was mostly in the red, with the exception of short-term bonds. Gold is sensitive to movements in interest rates because they can affect the opportunity cost of holding non-yielding bullion.

The US Dollar Index (DXY) fell 0.23% to 101.92, decreasing by 1.55% since the beginning of the year 2023. A weaker dollar is beneficial for dollar-denominated commodities because it makes them cheaper for foreign investors to buy. Copper futures fell to $3.872 a pound, platinum futures rose to $1,073.30 an ounce, and palladium futures fell to $1,427.50 an ounce.

The XAU/USD gold price is expected to remain strongly supportive of the upward path if it stabilizes around and above the psychological resistance at $2000 an ounce. If the bearish pressure continues on the US dollar, the opportunity may be stronger for the bulls to move towards the $2025 and $2040 resistance levels. However, if the XAU/USD gold price breaches the $1970 support, as it recently did, it will be a first threat to the bullish trend of gold, according to the performance on the daily chart.