Gold traders took flight from risk assets after the second biggest bank failure in the U.S. since the Global Financial Crisis caused a market panic. Gold took up its role as a safe haven investment as the spot price (XAUUSD) gained a mouth-watering 5.67% from last week’s lows.  

This week, the U.S. CPI, PPI, Retail Sales, and Labour Market reports will drive the spot price. If the aforementioned reports point to higher inflation, the Federal Reserve will likely raise interest rates aggressively, boosting the U.S. Dollar and Bond market at the expense of Gold.  

Technical  

The XAUUSD spot price concluded its downtrend following a breakout above the descending channel pattern and the 100-day moving average. Support was established at the 1851.29 level following a breakout above the level, which acted as resistance prior to the breakout, while resistance is currently at the 1951.03 level. 

With bulls currently in the driver’s seat, the spot price will likely be headed towards resistance at the 1951.03 level if sellers do not enter the market at current levels. 

Alternatively, if bears come out of hiding, a rejection of the resistance level will likely play out. If the price approaches the upside on declining volume, it could signal the exhaustion of bullish activity within the market and the preparation of bears to take the spot price lower.  

Summary

The U.S. CPI due later today will be in the spotlight as traders gauge whether inflation will prompt the Federal Reserve to raise rates by 25 or 50 basis points. With the Federal Reserve walking a fine line between protecting the banking sector with lower rates or slowing inflation with higher rates, traders have bet on a 66% chance of a 25 basis point rate hike.  

Sources: Reuters, CME FedWatch Tool, TradingView