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The price of gold has broken another level. Two reasons

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On Monday, the price of gold broke the level of two thousand dollars an ounce. According to PKO BP expert Tomasz Niewiński, this is the result of a decline in confidence in the banking sector and the market’s belief that the Fed will stop raising interest rates in the face of the risk of a financial crisis.

In monday morning gold price passed the 2,000 mark. dollars per ounce. Meanwhile, at the beginning of the month, gold cost just over 1.8 thousand. dollars. According to Tomasz Niewiński, an expert at the PKO BP bank, several factors contributed to the increase in the price of gold.

Expert: We can talk about a crisis of confidence in the banking sector

– This is not yet a repeat of 2008, but after the recent events around SVB or Credit Suisse, one can talk about a crisis of confidence in the banking sector. This, in turn, makes the market change expectations as to the pace interest rate increases in Usa. J. Powell’s hawkish comments from two weeks ago faded into the background, expectations for a 25 basis point hike dropped. Today, the main scenario according to the Fed funds futures market is that the FOMC will leave interest rates unchanged at the March 21-22 meeting, Tomasz Niewiński told PAP.

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In his opinion, the valuation of gold is also affected by the fall in US bond yields.

Gold price quotesStooq

Declining bond yields

– There is a decline in profitability treasury bonds indexed inflation in the US, real interest rates. For example, in the first decade of March, the yields on 10-year TIPS reached 1.7 percent, now they have fallen to around 1.2 percent, which is a big move. And the price of gold is strongly related to real interest rates – when they increase, the price of gold decreases, and when they decrease, gold becomes more expensive – explained the PKO BP expert.

In Niewiński’s opinion, it cannot be ruled out that gold prices will break last year’s peaks – around USD 2,070 per ounce.

Main photo source: Shutterstock



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