Gold price retreat amid escalating banking fears, pre-data anxiety

Gold price marked its first daily loss in three the previous day as market sentiment sours amid escalating fears from the First Republic Bank (FRB) after the troubled bank’s shares dropped another 20% on Wednesday, following a 50% slump the previous day. With this, the FRB is likely to face the limits on its Fed borrowings, which in turn spreads the ripple effect across the markets and weighs on the risk appetite and the XAU/USD.

Elsewhere, the cautious mood surrounding the US debt ceiling expiration also exerts downside pressure on the Gold price as most policymakers aren’t agreeing on the measures suggested by US President Joe Biden. That said, the US House of Representatives currently votes on a bill suggesting the increase in the debt ceiling and to cut government spending, known as the "Limit, Save, Grow Act". Although the passage of the bill is only one step closer to the final destination, any disappointment can add to the risk-off mood and exert more downside pressure on the Gold price.

On a different page, recently mixed US data also confuse the market players about the Federal Reserve’s (Fed) moves past May’s 0.25% rate hike.

On Wednesday, US Durable Goods Orders rose by 3.2% in March versus 0.8% expected and -1.2% prior. Further details suggest that the Durable Goods Orders ex Transportation and ex Defense also rose past market forecasts and previous readings in March. Before that, US Conference Board's Consumer Confidence Index edged lower to 101.3 for April, versus 104.0 prior. Additional details of the publication stated that the Present Situation Index ticked up to 151.1 during the said month from 148.9 prior whereas the Consumer Expectations Index dropped to 68.1 from 74 previous readings. Further, the one-year consumer inflation expectations eased to 6.2% in April from 6.3% in March.

Amid these plays, the US Dollar Index (DXY) dropped to the lowest levels in two weeks before paring some of the daily losses to end Wednesday’s trading near 101.43. Further, Wall Street closed mixed while the United States Treasury bond yields are mostly sidelined.

To sum up, the downbeat sentiment and recent pick-up in the DXY prods the Gold buyers ahead of the key United States Q1 GDP data, expected to ease to 2.0% on an annualized basis versus 2.6% prior.