Gold has more room to rise as global banks struggle and the US Federal Reserve takes another interest rate decision, which could push it to break all-time highs and stay there.
“A sooner the Fed raises interest rates is likely to cause gold prices to rise again due to a possible additional decline in dollar and US bond yields,” said Tina Teng, an analyst at the financial services company “CMC Marlets.” And it expects that gold prices will trade between $ 2,500 and $ 2,600 an ounce, according to what was reported by the “CNBC” network, and Al Arabiya.net viewed it.
Investors were flocking to gold and treasury bonds, after bank stocks were hit by the closure of Silicon Valley and Credit Suisse banks.
Gold is trading at $1940.68 an ounce. On Monday, it breached $2,000 to hit its highest level since March 2022. Gold has risen about 10% since early March when the “SVB” crisis flared.
According to “Reuters” data, the highest level of gold was at $ 2075, recorded in August 2020. Demand from central banks is likely to keep prices high.
“Continued central banks buying gold bodes well for long-term prices,” said CEO Randy Smallwood of Wheaton Precious Metals.
Smallwood expects gold prices to reach $2,500 an ounce.
This comes, while demand for gold rose last year to its highest level in 11 years, due to “massive purchases from central banks,” according to the World Gold Council. Central banks bought the highest level in 55 years at 1,136 tons of gold last year.
Fitch: Gold prices will remain at high levels
In late March, Fitch Solutions predicted gold would reach a high of $2,075 an ounce “in the coming weeks.” The company based its expectations on “global financial instability,” adding that it expects gold to remain “high in the coming years compared to pre-Covid levels.”
Chief market analyst at Oanda exchange, Craig Erlam, agrees with Fitch’s buoyant outlook.
He said, “I think it is very reasonable to see a strong performance in gold over the coming months. New highs could be broken soon.”
Erlam attributed the reason to interest rates that are at their peak or close to them, and therefore the cuts are priced sooner than expected against the backdrop of recent developments in the banking sector, adding that he believes that the dynamic will enhance the demand for gold, even if it coincides with a more flexible dollar. .
Federal steps
Investors are closely watching the next moves of the Federal Reserve and their impact on gold prices.
The Fed kicked off its two-day meeting on Tuesday, where it is widely expected to approve a 25 basis point rate hike on Wednesday, although expectations differ among analysts.
“In general, the Federal Reserve will have to choose between rising inflation or stagnation,” said Nicky Shiels, head of metals strategy at MKS Pamp, expecting gold to continue rising to $2,200 an ounce.
A weaker dollar could support gold prices, according to HSBC’s chief precious metals analyst James Steele, who expects a 25 basis point hike from the Fed.
Gold and the dollar
There is usually an inverse relationship between gold prices and the US dollar. But investors lean toward the perceived safety of the US Treasury and gold simultaneously during periods of financial stress.
“This scenario doesn’t happen often but when it does – it’s always a sign of growing investor fear,” Steele said.