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Investors are Actively Redirecting Capital from the Dollar to Gold

3/20/2023 12:24 PM

Against the serious pressure on the American financial system, the XAU/USD pair is trading at 1975.0 within the upward correction, which may turn into a full-fledged trend.

Last week, several of the largest American venture banks declared bankruptcy at once, of which Silicon Valley Bank, which was one of the top 30 financial institutions in the country, stands out. Against the financial uncertainty, depositors began to actively withdraw deposits, which increased the lack of liquidity, and the US Federal Reserve was forced to take support measures, according to which banks can borrow from the regulator an almost unlimited amount of money. So, over the past week, market participants borrowed a record 300.0B dollars from the agency. For comparison, at the peak of the 2008 crisis, the volume of borrowings was only 111.0B dollars.

Thus, to increase liquidity, the US authorities have again increased the issue of money, which will have a positive effect on the rates of assets pegged to the dollar. Thus, the metal market made the most significant upward spurt since mid-summer 2020: over the past eight days, gold quotes have risen from 1800.0 to 1990.0, and given the proximity of the US Federal Reserve meeting, scheduled for March 22, they can grow even more on interest rate expectations.

On the daily chart, the price broke the key high of February 2 at 1950.0 and consolidated within a new uptrend.

Technical indicators strengthen the buy signal: fast EMAs on the Alligator indicator move away from the signal line, expanding the range of fluctuations, and the AO histogram forms rising bars in the buying zone.

Resistance levels: 1990.0, 2060.0. | Support levels: 1950.0, 1870.0.

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