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Will gold give up gains if bank turmoil eases?

Gold could scale fresh highs if the present market conditions prevail

Gold price edged lower in its battle with the wall of resistance around $2,010 amid warning by precious metal analysts that the yellow metal would give up gains if the bank turmoil eases.

While recession woes and geopolitical concerns propelled gold near multi-month high, its price slipped off for a while as markets consolidated amid the Good Friday holiday, despite being set for the weekly gain to around $2,007.

Economists at ANZ bank expect the yellow metal to give up gains if the bank turmoil eases. “While the ongoing banking sector issues remain an upside risk, we see gold prices giving up gains if the crisis eases. We hold our bullish view on gold for the long-term as the Fed pauses its interest rate hikes and the dollar continues to grind lower through the rest of the year,” ANZ Bank’s analysts said.

However, bullion experts said that the recently downbeat US employment clues and easing hawkish concerns about the Fed’s next move will keep the price firm, backed by a weaker dollar.

The World Gold Council said in its quarterly report that the yellow metal, which opened the year 2023 with a $20 per ounce jump over the 2022 year-end price at $1835.05 per ounce, gained 9.0 per cent in Q1 2023 amid concerns over a global economic slowdown, but see-sawed on bond market volatility. A surge in March to record the highest monthly inflows since 2019, reversed two weak months for global gold ETFs and futures investment, WGC noted in its report.

“Gold’s ‘mere’ resilience in 2022 may have been a disappointment to some. Despite crosswinds from unprecedented monetary tightening and spiking inflation, no real crisis materialised. But the risk of one is growing now,” said the report, adding, “With a US recession still on the cards, growing systemic risk adds to gold’s case.”

According to bullion analysts, the decline in gold prices was caused by higher-than-expected economic data from the US and the hawkish stance of the Fed governor, who stated that the interest rate hike regime would continue once the banking crisis subsides. They predicted more choppy seas for the entire precious metals basket, but with an upward bias.

They expect gold could scale fresh highs if the present market conditions prevail during the year. Key factors that will determine the future of the gold price in 2023 include the Ukraine war, US Fed’s stance on rate hikes, a full-blown banking crisis, the US inflation level, the demand for physical gold, investors’ appetite for gold ETFs, and the continued interest in gold purchases by central banks.