Gold Jumps as Credit Suisse Bank Sparks Contagion Fears
Alex Boltyan | Mar 15, 2023 01:27PM ET
Gold prices extended gains on Wednesday as risk aversion hit markets amid fears the U.S. banking crisis spreading into the Old Continent, with Credit Suisse shares plummeting.
Against this backdrop, global government yields have fallen sharply, favoring gold's advance. At the time of writing, the spot price, XAU/USD, is trading at the $1,935 area, up 1.7% on the day and accumulating more than a $100 gain from last week's low.
Following the Silicon Valley Bank (SVB) collapse in the United States, fears were reignited on Wednesday after shares of Credit Suisse – Switzerland's second-largest bank – lost nearly 30% in Zurich. The slump came after the top shareholder said it could not provide further support. Trading was temporarily halted in Credit Suisse (NYSE:CS) and other European banks, such as France's Société Générale (EPA:SOGN) and Italy's UniCredit.
The yellow metal benefited, given its safe-haven status and was further underpinned by government yields falling on both sides of the Atlantic. U.S. 10-year note rate dropped over 7% to 3.43%, while the 10-year German Bund yield tumbled 13% to 2.13% on Wednesday.
From a technical standpoint, the XAU/USD pair holds the short-term bullish perspective according to indicators on the daily chart, while the price continues to print higher highs above its main moving averages. Still, the RSI is approaching overbought territory, suggesting a corrective move might occur before another leg higher.
On the upside, if the yellow metal advances above $1,935, the following resistance levels could be faced at the February high of $1,960 and the $2,000 area. On the flip side, short-term supports are seen at the $1,890 zone, followed by the 20- and 100-day SMAs at $1,845 and $1,815, respectively.
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