Gold price retreats after hitting $2,000, banking issues continue.

Gold price has rallied over 10% in the past two weeks.Trust issues in banking sector continue despite the UBS takeover of Credit Suisse.

Gold price bulls have been the biggest beneficiaries of the international banking crisis that has taken over the financial markets in the past week. The bright metal has rallied more than 10% since March 8 and reached the round $2,000 level on Monday during the European trading session before retracing somewhat to trading $1,977 at the time of writing. Gold is nearing its double-top all-time highs from summer 2020 and March 2022 as traders try to find refuge in the most traditional safe-haven asset, ditching cash in the process.

International banking crisis lifting Gold price

The spark that started this extreme risk-off mood scenario was the collapse of Sillicon Valley Bank (SVB), and it didn’t take long before a big international bank, Credit Suisse, got in trouble. With news over the weekend of Swiss giant bank UBS taking over its rival in shambles in a deal orchestrated by authorities in Switzerland, the markets have not calmed down.

Adding substance to these fears, a Senior Swiss lawmaker reportedly warned that “the UBS-Credit Suisse merger is an enormous risk.” The lawmaker noted that “the newly merged bank is too big for Switzerland to handle.”

Phil Carr, from the The Gold & Silver Club, explains how the banking crisis is helping Gold, Silver and other precious metals stage this rally:

Over the weekend, UBS Bank agreed to buy Credit Suisse in a historic $3.3 Billion deal. But this still may not be enough to prevent risk of contagion spreading across the broader banking sector – and the global economy.

Depositors aren’t waiting around to find out, which bank fails next.On Friday, US customers withdrew a total of $42 billion from their accounts. That’s $4.2 billion an hour, or more than $1 million per second for ten hours straight.

Meanwhile, the precious metal markets recorded a net inflow totalling $5.9 billion. That’s the second largest inflow into safe-haven metals ever recorded in a single week since the 2008 Global Financial Crisis.Gold price rally at mercy of Federal Reserve conundrum

With the Federal Reserve meeting within the market sight this week, market players are asking themselves whether this flight to safe haven will keep benefiting Gold, or if the US Dollar can make a comeback. Eren Sengezer, Senior Analyst at FXStreet, depicts this conundrum in his weekly Gold price article:

“At this point, it looks very unlikely the Fed will opt for a 50 bps rate hike. If that were to be the case, the initial reaction could provide a boost to the USD and weigh on XAU/USD. However, such a decision could also revive fears over a deepening financial crisis and trigger a fresh bout of flight to safe-haven bonds, causing US T-bond yields to fall sharply and opening the door for a leg higher in Gold price.

At the other extreme, markets are likely to go back into panic mode even if the Fed were to leave its policy rate unchanged to address the tightening of financial conditions. Investors could assess such a decision as the situation in the banking sector being much worse than what they were led to believe.”

Forecast poll experts not buying into Gold price hype

Despite the huge bullish momentum in Gold price, FXStreet Forecast Poll respondents are way more cautious, with the consensus not buying the current hype of XAU/USD bulls. The average end-of-the-week target for the bright metal in the poll $1,947.62, with 50% of the experts in bearish territory.

This might reflect a cautious market positioning ahead of a super busy week, with the FOMC Meeting looming, but can also be read in a counter-intuitive way, with US Dollar bulls (or US Treasury bond bears) vulnerable to more losses if the nervousness of the market persists throughout the week.

EUR/USD continues to trade in positive territory above 1.0700

EUR/USD has managed to stay in positive territory above 1.0700 despite having retreated modestly in the early American session. ECB President Lagarde reiterated that inflation in the Eurozone is projected to remain too high for too long, helping the Euro keep its footing.

EUR/USD News

Gold falls below $1,980 as US yields rebound

Gold price has turned south and dropped below $1,980 after having rallied to a fresh multi-month high of $2,010 earlier in the day. The 10-year US Treasury bond yield has turned positive on the day near 3.5% following the sharp decline seen in the European session and weighed on XAU/USD.

Gold News

GBP/USD rises to fresh multi-week highs above 1.2250

GBP/USD has gathered bullish momentum and advanced to its highest level since mid-February above 1.2250 on Monday. The US Dollar struggles to find demand following a mixed opening in Wall Street and allows the pair to cling to its daily gains.