As fading financial jitters reduce demand, gold prices decline

On Wednesday, gold prices fell as demand for the YELLOW metal decreased and investors moved towards riskier asset. This is due to decreasing concerns about a possible worsening of the global banking crisis.

"We've seen a natural retracement. Gold is pulling back after a failed 'bid' to break above $1,975". Reuters quoted Matt Simpson, a senior market analyst at City Index.

But according to him, some buyers "still seem to be holding onto gold 'just in case' there is another skeleton or two lurking in the closet," and gold may receive another bid going into the European session.

Although the uncertainty in the financial system would "ultimately" support gold, Simpson warned that if inflation remained high and U.S. economic statistics remained strong, prices could become more volatile and difficult to predict over the coming weeks.

Macquarie said that they expect the Fed to "prioritise bringing inflation back to target – with one more rate hike and then no cuts in the early stages of economic contraction," resulting in cyclically weaker gold prices through the second half of 2023.

Meanwhile, as per Reuters, markets are pricing in a nearly 42% chance of a 25-basis-point Fed hike in May.