Gold Outlook: On March 27, the announcement that First Citizens Bancshares Inc, the parent company of First Citizens Bank in North Carolina, had acquired the bankrupt lender Silicon Valley Bank (SVB) temporarily eased market concerns, leading to a decrease in demand for safe-haven Gold.
According to a press release from the FDIC, First Citizens has taken control of SVB’s $119 billion in deposits and loans, as well as $72 billion in assets at a discounted price of $16.5 billion. However, while the deal may limit the fallout from SVB’s failure, it is still expected to have cost the FDIC $20 billion.
Policymakers voice concerns over banking crisis, recession
Despite the news of First Citizens Bank’s takeover of Silicon Valley Bank, the price of Gold may still be experiencing safe-haven inflows as policymakers express concerns about the possibility of more banking contagion leading to a potential recession.
In an interview on the CBS program Face the Nation, Minneapolis Fed President Neel Kashkari stated, “Recent stress in the banking sector and the possibility of a follow-on credit crunch brings the US closer to recession. It definitely brings us closer.” Kashkari also added that the extent to which banking stress is causing a widespread credit crunch is uncertain, but if it does occur, it could slow down the economy. The situation is being closely monitored by policymakers.
Gold price is in an intact uptrend
The price of Gold has continued to trend upward on a short to medium-term basis, with higher highs and lows observed on the daily chart. This supports the traditional saying, “The trend is your friend until the bend at the end,” suggesting that there may be a preference for bullish positions.
The next target for the price of Gold is expected to be the $2,070 highs seen in March 2022. However, to confirm a move higher, it is necessary to break and close above the $2,009 highs of March 20, which occurred during a period of market panic following Credit Suisse’s failure.
The Average Directional Index (ADX) indicator, which measures the strength of a trend, is currently indicating a reading of 35, suggesting that the uptrend is strong. This reading is considered to be in a favorable range – if it were much higher, such as above 45, it could indicate that the market is overbought or nearing a top. Conversely, if the ADX reading were below 20, it might suggest that Gold is in a sideways market.