In the last few weeks, interest rates, inflation, as well as rising oil and gold prices, have been the talk of the town in the financial world. Gold prices rose above the $2,000 mark for the first time in the last 12 months.

Will gold prices continue to rise? What do analysts forecast? This blog aims to give you some valuable insights and help you have a better overview of what’s going on with the prices of this precious metal.
 

Gold jumps above the $2,000 mark as it happened

Gold started the year trading at $1,854 per ounce and quickly gained ground starting in February at 1,950. However, February wasn’t a positive month for gold prices as they dipped to $1,810 per ounce on February 24th. After the first ten days of March, the precious metal’s prices rallied on the back of global market uncertainty and bank sector turmoil in the US and Europe.

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Depicted: Admirals MetaTrader 5 - XAU(100oz)USD Daily Chart. Date Range: November 25th, 2022 –April 10th, 2023. Date Captured: April 10th, 2023. Past Performance is not an indicator of future results

This is not the first time that gold prices have surged beyond $2,000 per ounce. The last time that gold prices passed the specific mark was on August 7th, 2020, when they hit $2,074 per ounce.

Depicted: Admirals MetaTrader 5 - XAU(100oz)USD Monthly Chart. Date Range: July 1st, 2015 –April 10th, 2023. Date Captured: April 10th, 2023. Past Performance is not an indicator of future results.
 

Why do gold prices rise?

The turmoil in the banking sector in the US and Europe with the SVB collapse and the takeover of Credit Suisse by UBS, high inflation, and the possibility of a recession work in favor of gold. Gold is frequently mentioned as a “safe haven” asset by some investors and traders as they turn to it when they feel an economic downturn is on the way.

While no asset is “safe” when it comes to preserving value in the global financial markets, investors tend to buy gold to diversify their portfolios and mitigate risks. Gold can be used as a hedge against inflation while  the Federal Reserve Bank of Chicago has noted that “a rise in inflation or inflationary expectations increase investors' interest in purchasing gold and, therefore, drives up its price; in contrast, disinflation or a drop in inflationary expectations does the opposite.”
 

Gold prices: Read all the latest insights

The rise of gold spot prices has provoked banks and market experts to update their forecasts. Read our guide about trading gold to strengthen your knowledge. Let’s see what the latest insights are, and please keep in mind that past performance isn’t a reliable indicator of future performance.

ING sees gold prices near August 2020 high

ING’s analysts published a report suggesting that gold prices could reach the $2,075 mark which would be a three-year high. They note: “There does not yet seem to be much weight to the narrative that a US banking crisis is going to undermine the Fed's battle against high and ingrained inflation. And certainly Gold – as a non-interest bearing asset – is doing well compared to the near 5% rates available in overnight Dollar deposits. Markets will be keeping a close eye on the US jobs report and whether this takes the gold market to striking distance of its all-time high of $2,075.47 made in August 2020.”    

Economists at ING suggest that gold could benefit from FX reserve management trends. “The increasingly bipolar geopolitical world – exacerbated by the war in Ukraine – means that BRICS+ central banks will be keeping a greater share of their international reserves in Gold. This is a structural positive for Gold and a structural negative for the Dollar, one to add to the cyclical negative of what should be a Fed easing cycle later this year,” they add in their report. 

Credit Suisse: Gold prices could eye the $2,300 mark

A report by Credit Suisse said that the precious metal has taken advantage of falling bond yields and a weakened US dollar. “We look for a retest of long-term resistance from the $2,070/75 record highs of 2020 and 2022. Whilst this should clearly be respected, a clear and sustained break higher would mark a major bullish long-term breakout to open the door to a move to $2,300 next,” is written in the Credit Suisse report.

According to CNBC, a note from the same bank to investors noted that “gold prices have benefited in recent weeks from safe haven demand amid concerns on the banking sector, as well as a view that the likelihood of a recession (i.e., hard landing) has materially increased. This, in turn, has led to the view that the U.S. Fed could potentially pivot to rate cuts soon. Lower rates, coupled with inflation still well above the 2% target, would be positive for gold prices.” 

ANZ: Gold remains in sight of a record high on the back of elevated inflation

ANZ’s economists emphasize the high inflation element that underpins the rise of gold spot prices. They suggest that concerns over a global economic downturn and bank problems that surfaced in March fuel the gold’s rally.

However, they stress that if the situation in the bank sector stabilizes, gold prices might fall. “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 USD continues to grind lower through the rest of the year,” is mentioned in the ANZ’s report.

Fitch Solutions revises 2023 gold prices forecast

Fitch Solutions updated its gold prices forecast for 2023 in the last days of March. Economists suggest that gold prices will average $1,950 per ounce, $100 more than their original forecast. The report stressed that “amid expectations the global GDP growth will slow from 3.1% in 2022 to 2.1% in 2023, investor interest in gold's safe-haven status will remain strong.”
 

Is there a way to reduce risk when trading gold?

“Gold is a safe haven asset” is a sentence that you might read many times in blogs and news articles. However, trading any asset involves risk. There is always the potential for loss when engaging in activities such as trading and investing. If the price of a commodity such as gold moves in the opposite direction of what you had anticipated, your strategy may fail, which could result in a loss of funds.

Conducting in-depth market research before developing your trading strategy is essential. In addition, you need to be familiar with the various risk-management tools that are made available to you by your broker.

A plethora of educational materials that have been compiled by numerous industry professionals is available on the internet via brokers. It is absolutely necessary to learn how to use various risk management tools. Webinars, articles, and blogs written by experienced dealers can assist you in gaining a better understanding of how to incorporate these elements into your strategy and reduce risk.

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