A look at gold’s price shows that it has maintained its level above USD 1900. However, recently markets have become calm and less volatile due to the delivery of deposits made to the First Republic.
On Friday, the price of gold remained stable as traders assessed a hectic week that has been advantageous for the valuable commodity.
The recent turmoil in the U.S. banking sector has not only affected the stock market but also brought the price of the USD down.
As a result of the turmoil the desire for the yellow metal, gold which is also considered a haven has increased.
As per the latest news a group of 11 banks collectively deposited USD 30 billion into First Republic Bank overnight.
Further details have revealed that banks such as JP Morgan, Bank of America, and Citibank each have deposited the sum of $ 5 billion.
Furthermore, Morgan Stanley and Goldman Sachs both have deposited $2.5 billion each to ease the current banking turmoil.
Some other banks will also be part of this recovery plan but are more likely to submit a smaller amount.
Amid the banking crisis, consumers withdrew their assets from the 18 smaller banks in the U.S. Now, these big banks are depositing reserves into those banks to bring the market back to normal.
However, the forex and commodities markets have relaxed amid the news that Federal Reserves have restructured their interest rate hike plans.
What is The Future of Gold?
The price of gold may rise if there is a rise in concern about the severity of issues within the banking industry.
This could also lead to increased support for gold.
But experts also believe that the market could see a shift towards other factors that could affect gold if the current rescue packages prove sufficient to control the situation.
The possibility exists that the Fed’s rate hike plans, which have been significantly lowered, could be revised upward if inflation fear remains relevant.
Technical Outlook of Gold
For several months now, gold appears to be behaving more like a risky asset rather than a haven. Experts do believe that the current situation is very confusing for gold investors.
Over the past several months high-interest rate talks have halted its value. Now the market is uncertain how long the gold will remain stable.
For instance, if the current recovery plan gives the U.S. banking sector stability then the Fed will once more look for a 75 bps price rate hike.
In that case, Gold’s price will plunge. If the Feds decided to increase the interest rate by 25 bps this would give gold price much-needed momentum. This uncertainty has created confusion in investors’ minds.
Assets that do not generally yield or return on investment tend to lose value when yields are readily available or easily obtainable.
This means that in a situation where there is a high yield or profit potential, assets that do not generate any yield will be less attractive to investors.
Hence, it can be argued that gold is no longer a haven. Gold itself is having a tumultuous year in terms of its price.
If the supporters of metal are correct in their beliefs, then this period should be one of the most prosperous times for the genre in years. According to the latest economic data inflation fears have increased across the globe.
In case inflation reached higher than the predicted range then Feds will be forced to increase the interest rate. Hence, the price of gold will go down. In either case, confusion looms around the future of gold.
It seems that currently there is no solution for uncertainty related to gold prices. It is worth mentioning that U.S. Federal Reserves’ final monetary policy meeting is scheduled for March 22nd.
The Feds officials will finally decide what to do with the interest rate. It has been advised that investors should wait for the outcome of the Feds meeting before investing in gold.