- Gold prices have more room to the upside and could go as high as $2,600 an ounce.
- After the collapse of Silicon Valley Bank and the struggles of Credit Suisse, investors turned to gold and government bonds.
- Gold’s all-time high was $2,075 in August 2020, according to Refinitiv data.
Investors flocked to gold and Treasuries as bank stocks were hit by the shutdown of Silicon Valley Bank and the implosion of Credit Suisse.
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Gold prices have more leeway as global banks struggle and the US Federal Reserve makes another interest rate decision that may break all-time highs – and stay there.
“An earlier move by the Fed to hike rates is likely to lead to a further rise in gold prices due to a possible further decline in the US dollar and bond yields,” said Tina Teng of financial services firm CMC Markets. She expects gold prices to range between $2,500 and $2,600 an ounce.
Investors flocked to gold and Treasuries as bank stocks were hit by the shutdown of Silicon Valley Bank and the implosion of Credit Suisse.
Gold is trading at $1,940.68 an ounce. It broke through $2,000 on Monday, hitting its highest level since March 2022. Gold is up about 10% since early March, when SVB was hit by a bank run.
Gold’s all-time high was $2,075 in August 2020, according to Refinitiv data. The demand from the central banks should put the wind in the sails.
“The continued central bank gold buying bodes well for long-term prices,” said CEO Randy Smallwood of Wheaton Precious Metals, a precious metals streaming company.
I think it is very plausible that we will see strong performance from gold in the coming months. The stars appear to be aligning with gold, which could see it making new highs shortly.
Craig Erlam
Lead Market Analyst at Oanda
In late March, Fitch Solutions forecast that gold would hit a high of $2,075 “in the coming weeks.” The company justified this outlook with “global financial instability,” adding that it expects gold “to remain elevated relative to pre-Covid levels for years to come.”
“I think it’s very plausible that we see strong performance in gold over the coming months. The stars appear to be aligning with gold, which could see it making new highs shortly,” said one analyst.
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Craig Erlam, senior market analyst at FX firm Oanda, agrees with Fitch’s buoyant outlook.
“I think it’s very plausible that we see strong performance in gold over the coming months. The stars appear to be aligning with gold, which could see it making new highs shortly,” he said.
“Interest rates are at or near peaks, cuts are now being priced in earlier than expected due to recent developments in the banking sector,” said Erlam, adding that he believes the momentum will boost gold demand even if it coincides with a softer one Dollar.
“Overall, the Fed has to choose between higher inflation or a recession, and both outcomes are bullish on gold,” said Nicky Shiels, head of metals strategy at precious metals firm MKS Pamp.
Alexander Mansyuk | Anadolu Agency | Getty Images
“Overall, the Fed has to choose between higher inflation or a recession, and both outcomes are bullish on gold,” said Nicky Shiels, head of metals strategy at precious metals firm MKS Pamp. She forecasts gold to rise to $2,200 an ounce.
A weakening dollar could support gold prices, according to HSBC chief precious metals analyst James Steel, who expects a 25 basis point hike from the Fed.
“What we saw earlier [last] Week were the simultaneous events of gold and dollar. And that’s quite unusual,” Steel said, citing the rise in the price of gold and the dollar over the past week.
There is usually an inverse relationship between the price of gold and the US dollar. But investors tend to like the perceived safety of both US Treasuries and gold at the same time during times of financial stress.
“This scenario doesn’t happen often, but when it does it’s always a sign of heightened investor concern,” Steel said.