Gold Price Forecast: XAU/USD scales above $1,910 as SVB fallout limits Fed’s tightening pace

Gold price (XAU/USD) has refreshed its five-week high at $1,914.70 in the early Asian session. The precious metal has delivered a three-day winning streak and is expected to continue its upside momentum as a sudden collapse of Silicon Valley Bank (SVB) might force the Federal Reserve (Fed) to continue a lower pace of policy tightening if not halt the restrictive regime.

President Joe Biden said the administration's swift actions to ensure depositors can access their funds in Silicon Valley Bank (SVB) and Signature Bank (SBNY) should give Americans confidence that the U.S. banking system was safe, as reported by Reuters.

The US Dollar Index (DXY) has sensed an intermediate cushion around 103.50, however, sheer volatility is expected ahead as investors will keep an eye on the United States Consumer Price Index (CPI) data.

Analysts at Credit Suisse expect “Expect core CPI inflation to remain steady at 0.4% MoM in February, causing the YoY reading to tick down to 5.5%. Energy and food prices are likely to moderate, with headline inflation also coming in at 0.4% MoM. A reading in-line with our expectations would be uncomfortably high for the Fed, but still consistent with gradual disinflation this year.”

S&P500 futures are showing marginal gains after a subdued Monday, a case of a dead cat bounce, however, the risk sentiment is still negative. The 10-year US Treasury yields dropped to 3.54% as Fed chair Jerome Powell won’t go heavy on interest rates to maintain consumer confidence in the economy.

Gold technical analysis

Gold price has scaled above the 61.8% Fibonacci retracement (placed from February 2 high at $1,959.71 to February 28 low at $1,804.76) at $1.901.24. A decisive break above 61.8% Fibo indicates that the asset will recapture the previous swing high ahead.

Upward-sloping 20-and 50-period Exponential Moving Averages (EMAs) at $1,900 and $1,883.00 add to the upside filters.

The Relative Strength Index (RSI) (14) oscillates in the bullish range of 60.00-80.00, which indicates an upside momentum is already active. However, some corrections due to an overbought situation cannot be ruled out.

Gold two-hour chart