Gold prices held steady near key levels on Friday, surpassing the dollar for a third consecutive week as investors sought refuge in the yellow metal amidst signs of a less hawkish Federal Reserve and turmoil in the banking sector. Bullion prices were also poised for a fourth straight week of gains if current levels were maintained, as the dollar fell to a seven-week low against a basket of currencies.
XAUUSD-Daily Chart
The weakening of the dollar followed the Fed's decision to hike interest rates earlier in the week. Still, it implied that peak rates may be in sight. A recent banking crisis demonstrated the growing economic impact of high borrowing costs. Spot gold remained unchanged at $1,993.60 an ounce, while gold futures stabilized at $1,995.65 an ounce.
Spot gold gained approximately 0.2% this week, while gold futures were on track to add 1%. The yellow metal was less than $100 away from its record high of $2,074.88 an ounce during the COVID-19 pandemic in 2020.
The collapse of several regional US banks caused investors to flock to gold over the past three weeks amid concerns of contagion. While regulators intervened to restore faith in the banking system, markets remained on edge over any further disruptions.
The Fed's softening of its hawkish stance also raised concerns about a banking collapse, even as Treasury Secretary Janet Yellen attempted to reassure investors of stability in the sector. The markets are now pricing in the possibility that the Fed will raise rates only once more this year after hiking rates by a cumulative 475 basis points in the past 12 months.
Gold Price Prediction (XAU/USD)
A pause in the Fed's hiking cycle is advantageous for gold, which was under pressure from the dollar's strength and rising yields throughout 2022. The yellow metal also benefited from uncertainty about an economic slowdown this year. Other precious metals were muted on Friday but set for an intense week.
