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Investing.com – Banking sector turmoil and concerns about the economy have sent gold prices to $2,000 an ounce for the first time in a year, but the question remains, will gold continue to rise or turn lower?
The most traded jumped about 8% to $1,984.50 this month, hitting an intraday high of $2,014.90 last week and on track for the biggest monthly percentage increase since July 2020. Prices have not exceeded $2,000 since Russia’s invasion of Ukraine last spring, according to the newspaper. Wall Street Journal.
However, recent gains have raised concerns that a banking crisis could push the economy into recession.
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More winnings
Meanwhile, investors’ rush to safer investments has pushed down government bond yields, adding to gold’s relative attractiveness. The drop in yields also weakened the dollar slightly, making gold — which is priced in dollars — less expensive for foreign investors, according to the Wall Street Journal.
Many analysts and investors said that the banking turmoil heralds a temporary pause in the Federal Reserve’s campaign to increase interest rates, which could lead to more gains for gold.
The Fed raised interest rates by a quarter of a percentage point last week while signaling that stress on the banking system may end interest rate hikes sooner than investors or officials recently anticipated.
Gold stocks
Gold-producing stocks were among the best performers this month. Shares of Newmont Corp rose nearly 11%, shares of Canadian-listed Barrick Gold Corp rose nearly 14%, and Kinross Gold Corp advanced nearly 27%. This compares to a gain of 1.5% for the S&P 500, according to the Wall Street Journal.
EPFR data showed that investors poured about $1.26 billion into gold mutual funds and exchange-traded funds during the week ending March 22, the largest weekly net inflow since April 2022.
He plans to buy shares in gold funds for the first time since the European debt crisis in 2009, said Todd Jones, chief investment officer at Gratus Capital in Atlanta.
“During periods of lack of confidence in the financial system, gold tends to be the best,” Jones added.
Owning gold
Banking turmoil has sent gold prices above $2,000 for the first time since the Russia-Ukraine war, when concerns about the war led to losses in other investments sent the precious metal rallying. But the Fed’s aggressive interest rate moves and rising bond yields, adjusted for inflation, have weighed on prices over the past period, according to the Wall Street Journal.
However, prices have risen again this year, fueled first by hopes that slower growth and slowing inflation will lead to a Fed retreat, and then by fears that banking problems will lead to a slowdown.
However, these concerns have led to some significant price fluctuations. The CME Group’s gold volatility index recently hit its highest level since last spring. Traders were also preparing for more upside than downside risks in the future.
Meanwhile, the picture in the markets and the economy is still murky. Recent gains in stocks have fueled hopes that banking turmoil will ease. And if inflation remains hot, that could prompt the Fed to resume interest rate increases later in the year hurting gold, according to the Wall Street Journal.
But for now, some are betting that gold’s gains can continue.
“As long as growth continues to slow and inflation goes down, we’ll want to own gold,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management in Florida.
Gold and the dollar now
It rose by 0.3% at $1,970 an ounce.
While US gold futures rose 0.15% to 1987 dollars.
It decreased by 0.3%, to record 102.02 points.
