The price of gold may rise amid the problems of banks in SVB and Credit Suisse

Gold prices have more room to run as global banks struggle and the US Federal Reserve makes another interest rate decision, which could break all-time highs – and stay there.

“A sooner Fed rate hike is likely to cause gold prices to rise again due to a possible additional drop in dollar and US bond yields,” said Tina Teng of financial services firm CMC Markets. It expects gold prices to trade between $2,500 and $2,600 an ounce.

Investors have been flocking to gold and Treasurys as bank stocks have been hit by the closing of Silicon Valley Bank and Credit Suisse.

Gold is trading at $1940.68 an ounce. And 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 was hit by banks.

According to Refinitiv data, gold’s all-time high was $2,075 in August 2020. Demand from central banks is likely to keep the wind in their bad guys.

“Continued central bank buying of gold bodes well for long-term prices,” said Randy Smallwood, CEO of Wheaton Precious Metals. running company.

In late March, Fitch Solutions predicted that gold would reach a high of $2,075 “in the coming weeks.” The company based that view on “global financial instability,” adding that it expects gold to remain “high in the coming years compared to pre-Covid levels.”

Craig Erlam, chief market analyst at exchange firm Oanda, agrees with Fitch’s buoyant outlook.

“I think it is very plausible that we will see a strong performance in gold over the coming months. It seems that the stars are aligned with gold which could see new highs being broken soon,” he said.

“Interest rates are at or near their peak, and now cuts are priced in sooner than expected on the back of recent developments in the banking sector,” Erlam said, adding that he believes the dynamic will boost gold demand, even if it coincides. For softer dollars.

“Overall, the Fed will have to choose between higher inflation or stagnation, or a bullish outcome for gold,” said Nicky Shiels, head of metals strategy at precious metals firm MKS Pamp. It expects gold to extend 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.

What we saw earlier [last] The week was one of simultaneous events for both gold and the dollar. Steel said, referring to the rise in gold prices and the dollar last week.

There is usually an inverse relationship between gold prices and the US dollar. But investors tend to like the perceived safety of US Treasury bonds 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.