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Gold set for third weekly loss as ‘higher-for-longer’ interest rate outlook weigh

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Gold (XAU/USD) extends losses on Friday following a sharp two-day decline that pushed prices to their lowest level since early February, near the $4,500 mark. The drop comes as markets increasingly price in a ‘higher-for-longer’ global interest rate environment following this week’s major central bank monetary policy announcements.

At the time of writing, XAU/USD is trading around $4,580, pulling back from an intraday high near $4,735, and remains on track to post a third consecutive week of losses.

Gold loses shine as hawkish central banks tighten grip

The Federal Reserve (Fed), Bank of Japan (BoJ), Swiss National Bank (SNB), Bank of England (BoE), Bank of Canada (BoC) and European Central Bank (ECB) all kept interest rates unchanged, while the Reserve Bank of Australia (RBA) raised rates, with policymakers highlighting upside inflation risks driven by higher Oil and energy prices amid ongoing war in the Middle East.

Gold, despite being an inflation hedge and a safe-haven asset, has struggled to attract demand. Prices are down by more than 10% since the US-Israel war with Iran erupted, as Oil-driven inflation concerns led traders to reprice global interest rates in a more hawkish direction, with recent central bank signals reinforcing this shift.

Market participants now expect the Fed to remain on hold through 2026, compared to earlier bets of at least two rate cuts within this year. The ECB, previously seen staying on hold, is now priced to deliver a rate hike by July and another by year-end.

The BoE was earlier expected to cut rates, but is now priced for around two hikes this year. The BoJ remains on a gradual tightening path. The BoC is expected to hold rates, though persistent inflation could push the Ottawa-based institution toward tightening. Meanwhile, the RBA is expected to deliver more rate hikes.

Higher interest rates increase the opportunity cost of holding Gold, making yield-bearing assets more attractive. Another factor weighing on the metal is a broadly stronger US Dollar (USD).

As both Gold and Oil are priced in USD, rising energy prices tend to boost demand for the Greenback, which in turn pressures Gold. In addition, the USD’s role as the world’s primary reserve currency supports demand during periods of heightened geopolitical uncertainty, as investors seek liquidity and safety.

At the same time, fading expectations for Fed rate cuts have lifted US Treasury yields, further supporting the USD and adding to the downside pressure on the non-yielding metal.

Fed Governor Christopher Waller said on Friday that a sustained rise in Oil prices could have a lasting impact on inflation rather than a temporary one. He added that while underlying inflation may be close to the Fed’s 2% target, tariffs are keeping price pressures elevated. Waller also noted that he would support rate cuts later in the year if the labor market remains weak.

On the geopolitical front, tensions in the Middle East remain elevated with no clear signs of easing, although Israel has signaled it may refrain from further attacks on Iran’s energy infrastructure. Meanwhile, the Trump administration is considering plans to occupy or blockade Iran’s Kharg Island to pressure Tehran into reopening the Strait of Hormuz, Axios reported on Friday, citing sources familiar with the matter.

Technical analysis: Bearish momentum strengthens with RSI nearing oversold

On the daily chart, Gold is attempting to stabilize above the 100-day Simple Moving Average (SMA) near $4,605 after sliding below the 50-day SMA around $4,979 earlier this week, highlighting growing selling pressure in the near term.

Momentum indicators continue to support the bearish outlook. The Relative Strength Index (RSI) is hovering near 33, approaching oversold territory and reinforcing downside pressure. Meanwhile, the Average Directional Index (ADX) is rising toward 20, suggesting that the current downswing is gaining traction after a period of weaker trend conditions.

On the downside, a decisive break below the 100-day SMA and Thursday’s low at $4,502 could expose the February 2 low at $4,402. A move below this level would open the door toward the 200-day SMA at $4,091.

On the upside, if prices manage to hold above the 100-day SMA, Gold could attempt a recovery toward the 50-day SMA at $4,979, with the $5,000 psychological level acting as immediate resistance. A sustained move above this zone could pave the way toward $5,200, a key resistance level needed to revive bullish momentum.

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

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Forex Today: Major pairs stabilize as markets assess central bank policy outlooks

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Here is what you need to know on Friday, March 20:

The trading action in financial markets turns relatively subdued on Friday as investors assess the policy decisions by major central banks. The US economic calendar will not feature any high-tier macroeconomic data releases on Friday and market participants will stay focused on developments surrounding the Middle East conflict.

US Dollar Price This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-1.26%-1.37%-0.76%-0.02%-1.42%-1.66%-0.13%
EUR1.26%-0.09%0.42%1.25%-0.15%-0.39%1.14%
GBP1.37%0.09%0.66%1.34%-0.05%-0.30%1.30%
JPY0.76%-0.42%-0.66%0.77%-0.65%-0.88%0.66%
CAD0.02%-1.25%-1.34%-0.77%-1.43%-1.63%-0.10%
AUD1.42%0.15%0.05%0.65%1.43%-0.27%1.30%
NZD1.66%0.39%0.30%0.88%1.63%0.27%1.53%
CHF0.13%-1.14%-1.30%-0.66%0.10%-1.30%-1.53%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

The Bank of England (BoE) announced on Thursday that it maintained the bank rate at 3.75%, as widely expected. All nine members of the Monetary Policy Committee (MPC) voted in favor of the decision. Markets were expecting two policymakers to vote for a rate cut. In the policy statement, the BoE acknowledged that higher global energy prices are already feeding into petrol prices and said that the MPC stays ready to act as needed to ensure the Consumer Price Index (CPI) inflation remains on track to meet the 2% target and that is has a range of possible responses. GBP/USD rose sharply on Thursday and gained more than 1% before entering a consolidation phase above 1.3400 in the European morning on Friday.

The European Central Bank (ECB) decided to leave key rates unchanged following the March policy meeting, as anticipated. “The war in the Middle East has made outlook significantly more uncertain, creating upside risks for inflation and downside risks for economic growth,” the ECB said. In the post-meeting press conference, ECB President Christine Lagarde noted that a prolonged war could increase energy prices for longer and erode incomes. Lagarde added that risks to inflation are tilted to the upside in the near term and said that they could have a “temporary, targeted and tailored” response to the energy shock. EUR/USD gathered bullish momentum and rose 1.2% on Thursday. Early Friday, the pair corrects lower but manages to hold above 1.1550.

Following Wednesday’s rally, which was fuelled by the Federal Reserve’s hawkish tone, the US Dollar (USD) Index reversed its direction and ended the day deep in negative territory on Thursday. In the European morning on Friday, the USD Index holds steady above 99.00. US stock index futures trade mixed after Wall Street’s main indexes closed marginally lower on Thursday.

European Union (EU) leaders called for a moratorium on military strikes on energy and water facilities in the Middle East amid growing concerns about the impact of the Iran war on the global economy, Reuters reported on Thursday. Meanwhile, US Treasury Secretary Scott Bessent told Fox Business Network that the US may “unsanction Iranian oil on water in coming days.” Crude oil prices continues to push lower after posting large losses on Thursday. At the time of press, the barrel of West Texas Intermediate (WTI) was trading near 93.50, losing about 1% on the day.

Gold extended its weekly slide on Thursday and touched its lowest level since early February near $4,500. XAU/USD stages a rebound in the European morning on Friday and trades at around $4,700.

USD/JPY gains traction and rises toward 158.50 early Friday after losing more than 1% on Thursday.

USD/CAD struggled to find direction and close virtually unchanged on Thursday. The pair edges lower on Friday but holds slightly above 1.3700. Statistics Canada will publish January Retail Sales data later in the day.

Central banks FAQs

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.

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Gold rebounds as Middle East tensions boost safe-haven flows

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Gold price (XAU/USD) rebounds to near $4,735, snapping the seven-day losing streak during the Asian session on Friday. The precious metal edges higher as the ongoing US-Iran conflict spikes demand for safe-haven assets. Traders will closely monitor the situation in the Middle East.

Iranian Foreign Minister Abbas Araghchi vowed to show “ZERO restraint” if the country’s energy infrastructure were hit again, per Bloomberg. Meanwhile, Saudi Foreign Minister Faisal bin Farhan Al Saud warned that the kingdom’s restraint isn’t “unlimited” and added it could take military action. Rising geopolitical risks could boost traditional safe-haven assets such as Gold in the near term.

On the other hand, soaring crude oil and energy prices, driven by the escalating US-Israeli war with Iran, reignite inflation fears. This, in turn, might delay rate cuts and make non-yielding gold less attractive.

The US Federal Reserve (Fed) left interest rates unchanged on Wednesday and expressed concern about the impact of rising oil prices on inflation. Fed Chair Jerome Powell said that the possibility of a rate hike has come up in policy committee discussions. Hawkish remarks from Fed officials lift the US Dollar (USD) and weigh on the USD-denominated commodity price.

Traders could sell liquid assets like yellow metal to cover margin calls and raise cash during the broader market volatility. “Global markets have seen broad selloffs as investors search for the quickest assets to sell, perhaps we are now seeing the next leg of this phase where the perceived safe haven assets are sold to fund purchases of those that may have overacted to the current situation,” said Paul Surguy, managing director and head of investment management and proposition at Kingswood Group.

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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Ethereum Price Forecast: EF deploys 3,400 ETH into Morpho as bullish momentum weakens

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Ethereum price today: $2,140

  • The Ethereum Foundation deployed 3,400 ETH into DeFi protocol Morpho in line with its treasury strategy.
  • The Foundation noted that Morpho Vaults V2 aligns with its defipunk framework.
  • ETH is testing the $2,110 support level amid fading bullish momentum.

The Ethereum Foundation (EF) said it has deployed 3,400 ETH into the decentralized finance (DeFi) lending protocol Morpho as part of its treasury strategy.

The Foundation highlighted in an X post on Wednesday that 1,000 ETH from that amount was deposited into Morpho Vaults V2. The move follows its deployment of 2,400 ETH and $6 million worth of stablecoins in Morpho Vaults V1 last October.

The EF stated that Morpho Vaults 2 aligns with its Treasury Policy defipunk framework, which it uses to decide on the protocols it will leverage for DeFi yield generation.

The post outlined that the protocol adopted the GNU General Public License (GPL) 2.0, pushing its code beyond open source alone to become “permanently auditable and forkable — not just now, but as they evolve.”

Morpho Vaults V2 also maintains immutability as its contracts can’t be changed or tweaked by any single entity.

“No admin key. No emergency switches,” the EF wrote. That’s not a limitation. The true cypherpunk infrastructure doesn’t ask you to trust its builders, and it removes the need entirely.”

The move follows the EF’s over-the-counter (OTC) sale of 5,000 ETH for about $10.2 million to Ethereum treasury firm BitMine Immersion (BMNR) last week.

The Foundation has continued down a new treasury path over the past year, following criticisms that it only uses the Ethereum mainnet to sell ETH. At the time, key community members suggested that the Foundation use private channels to sell ETH because investors often interpreted its public sales as bearish signals.

Ethereum Price Forecast: ETH tests $2,110 support amid fading bullish momentum

Ethereum has recorded $98.5 million in liquidations over the past 24 hours, led by $66.2 million in long liquidations, per Coinglass data.

ETH is testing the support at $2,110, which aligns with the 20-day Exponential Moving Average (EMA). The move comes after it fell below the 50-day EMA.

A decline below $2,110 could see ETH fall to $1,740 if the short-term base around $1,900 fails to hold.

ETH/USDT daily chart

On the upside, ETH has to overcome the resistance near $2,390 and the 100-day EMA to resume a bullish move toward $2,746.

The Relative Strength Index (RSI) and Stochastic Oscillator (Stoch) are trending downward at 51 and 49, respectively, indicating a rapidly fading bullish momentum.

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