“Gold Prices Fall Despite Banking Crisis, Uncertainty Creates Potential for Investors”

It lost some ground after the core annualized PCE price index in the US came in at 4.7% in April against the consensus forecast of 4.6%.

While in March, the Fed’s preferred measure of inflation was at 4.6%.

On a monthly basis, the core PCE price index increased by 0.4% versus the expected 0.3% in April, according to data released by the US Department of Commerce just before.

The US Federal Reserve prefers this measure because core inflation smooths out volatile food and energy prices.

The report also showed that personal spending was stronger than expected, coming in at 0.8% vs. 0.4%, while personal income rose 0.4% last month. Real personal consumption rose 0.5% in April.

Gold fell after the data was released, with June Comex trading at $1946.80 an ounce, up 0.16% from the day. Earlier in the session, the daily high was $1957.10 an ounce. Failure to drop inflation quickly enough may raise the stakes that the Fed still has more room to tighten.

You must buy gold

However, the gold market continues to show its potential to investors as prices this month tested record highs above $2,080 an ounce.

Gold’s rally to $2,085 came after the Federal Reserve raised interest rates by 25 basis points and shifted to a more neutral monetary policy. However, with the issuance of economic data indicating the strength of the economy, in addition to the hawkish statements of the Federal Reserve members, the markets began to expect an increase of 25 points at the next meeting, which negatively affected the yellow metal.

At the same time, while gold prices are falling, many market analysts said that we are in an environment of unprecedented uncertainty, and therefore dips in the gold market should be bought.

One of the main risks that is creating a lot of anxiety in the market is the ongoing banking crisis that started with the collapse of the First Republic Bank.

Meanwhile, Gareth Solloway, chief market strategist at InTheMoneyStocks.com and president of VerifiedInvestingEducation.com, said the banking crisis could cause the S&P 500 to collapse 20% this year, pushing gold to 2,300 an ounce.

Untapped potential

Another reason why many analysts remain bullish on gold, despite the recent setback, is that there is still a huge amount of untapped potential.

The World Gold Council released its report this month on global demand trends for the first quarter, which said global demand for gold fell 13% compared to the first quarter of last year.

The decline was led by investment demand, which fell by 51% to 273.7 tons. Investors only started jumping into gold-backed ETFs in early March when the banking crisis began. While these inflows were not sufficient to offset the outflows seen in January and February.

The ETF market saw outflows of 29 tons; However, this was a significant decrease compared to the 270 tons of inflows reported during the first quarter of 2022.

In the current environment, Juan Carlos Artigas, head of research at WGC, said he sees strong growth potential for gold investment demand.

As the Federal Reserve continues to tighten the screws with its hawkish monetary policy, it is creating pressures on other parts of the financial system, as we have started to see recently. This system has the potential to break down quickly, so now is the time to make sure you include some hedges in your portfolio, so there is a clear rationale for holding some gold.

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