Gold prices have more room to rise and could go as high as $2,600 per ounce with investors turning to the yellow metal after the collapse of Silicon Valley Bank and Credit Suisse’s crisis.

The US Federal Reserve’s interest rate decision will also be a factor showing the direction of the price movement.

Gold stayed in a consolidation phase at around $1,940 per ounce on Wednesday following Tuesday’s sharp decline soon after it breached $2,000 to strike its highest since March 2022. Gold has risen around 10 per cent since early March in the wake of SVB collapse. Its all-time high was $2,075 in August 2020, according to Refinitiv data.

Randy Smallwood, CEO of Wheaton Precious Metals, says demand from central banks will likely keep the wind in its sails and predicts prices hitting $2,500. “Continued central bank buying of gold bodes well for long-term prices,” said Smallwood.

According to precious metal analysts in Dubai’s Gold Souk, investor interest in gold’s safe-haven status will remain strong amid expectations the global GDP growth will slow to 2.1 per cent in 2023 from 3.1 per cent in 2022. Geopolitical concerns that favour a sustained gold rally include the Russian invasion of Ukraine, and the simmering tensions between US and China.

Fitch Solutions has revised its 2023 price forecast for gold to $1,950 per ounce from $1,850 previously as the banking turmoil has triggered a rush to safety among investors fearing recession, while market expectations for aggressive rate hikes by the US Federal Reserve have now collapsed. “We believe the mounting of global financial instability is likely to drive gold prices towards its all-time high of $2,075/oz in the coming weeks, although there is significant resistance around that level as the dollar remains strong while we believe that contagion risks from the demise of SVB and Signature Bank will be broadly limited,” the research and analytics firm said in a note.

According to bullion dealers in Dubai, a further gold price surge is likely to confront some resistance near the $1,955-$1,960 region from a technical perspective. A sustained move beyond has the potential to lift the yellow metal to the key $2,000 and the one-year high, around the $2,010 area touched on Monday.

“A sooner Fed pivot on rate hikes will likely cause another gold price surge due to a potential further decline in the US dollar and bond yields,” said Tina Teng from financial services company CMC Markets. She expects gold will trade between $2,500 to $2,600 an ounce.

Following the banking crisis triggered by SVB and Credit Suisse, investors have been showing an increased appetite for gold and Treasuries.

However, the recent news that UBS will rescue Credit Suisse in a $3.24 billion deal helped calm investors’ nerves about the contagion risk and prompted them to cautiously return to riskier assets. This led to a strong two-day rally in the equity markets, which, in turn, temporarily resulted in receding demand for traditional safe-haven assets, posing a headwind for gold price on Tuesday after it breached $2,000 to strike its highest since March 2022.

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