Gold bulls have been the greatest recipients of the worldwide financial emergency that has assumed control over the banks in the previous week. The yellow metal revitalized over 10% since March 8 and surpassed the 2,000 level on Monday during the European session prior to backtracking a piece to $1,980 at the hour of writing. Gold is approaching its double top all-time highs from summer 2020 and March 2022 as brokers attempt to track down shelter in the most conventional safe haven product, dumping cash all the while.
The safe haven assets such as gold have performed strongly in the last three weeks, as three mid-size U.S. banks have collapsed, followed by Credit Suisse, a bank deemed by regulators to be a Global Systemically Important Bank (G-SIB). Credit Suisse is by far the largest bank to collapse in the last decade. With news over the weekend of Swiss giant bank UBS taking over its rival in shambles in a deal orchestrated by authorities in Switzerland, the markets have not calmed down. The banking crisis and the possible risk of the US economy of having a “No Landing” scenario also caused investors to move their investments towards the safe haven metal. It was reported that US customers withdrew $42 billion from their accounts that’s roughly around $1 million per second for ten straight hours, and the Gold metal recorded an inflow of $5.90 billion, which is the second largest inflow in metals since the 2008 financial crisis.
With the Federal Reserve rates revision coming this Wednesday, it seems likely that the FED would increase the interest rates by 25 basis points, this could revive the appeal in Dollar and treasury yields but at the same time instill fear in the market participants of a recession as well, which can trigger a fresh flight to T-Bonds and lower its yield, thus causing the price of gold to increase to new highs. More focus would be on the press conference of FED headed by Jerome Powell which starts usually around 30-45 minutes after the rates are announced, as investors would be all ears on how the FED would juggle both price and financial stability together. Moreover it is expected that the FED will most likely pause its rate hikes in the second half of the year due to the risk of recession. Which would provide a good rally in metals specially Gold.