Trading activity on the precious yellow metal resulted in a drop of about 1.31%, with the dollar’s weakening acting as a tailwind to moderate the decline. Gold, which is currently moving around its strong support at $1950 after accounting loss of $26 on Monday, also benefited from a weaker dollar.
Over the weekend, the main factor that had boosted demand for the precious metal has declined. A banking crisis involving Silicon Valley Bank and Signature Bank of New York that threatened to affect other institutions was the main source of worry.
It was revealed over the weekend that First Citizens Bank and the Silicon Valley Bank in Santa Clara have reached an agreement. On March 10th, the SVB was shut down by Californian authorities. The First Citizens Bank & Trust Company of Raleigh, North Carolina, finalized a purchase agreement from deposits and loans of the Silicon Valley Bridge Bank, the Federal Deposit Insurance Corporation (FDIC).The purchase of SVB significantly allayed concerns that the banking crisis would spread and cause more banks to go bankrupt. Investors switched their money from safe-haven assets to riskier ones, such U.S. shares, which decreased the demand for safe-haven assets.
Gold’s consecutive 2 day decline may be temporary as market participants pay attention to remarks made by the Federal Reserve last week. The Federal Reserve announced that it would soon start suspending interest rate hikes for the first time since it started raising rates. Now, it is projected that the Fed will begin another 0.25% rate walk in May before pausing rate hikes to evaluate the long-term effects of their rate-hike frenzy that started in March 2022 on inflation.
Moreover, Chairman Powell mentioned that the main focus will remain on the upcoming data of inflation. Therefore, pause in hikes would be the better step to rate cuts.