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Natixis raises its 2023 gold price average but doesn't see $1,900 holding as banking crisis fears start to ease

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(Kitco News) - The U.S. government’s commitment to ensuring depositors’ money is safe at failing regional banks appears to be calming fears of a major banking crisis. And while improving optimism in the marketplace could weigh on gold in the near term, one market analyst says he sees a higher price floor in place.

In a research note Monday, Bernard Dahdah, precious metals analyst at Natixis, said that he doesn’t expect gold prices to hold $1,900 an ounce as the steps the government has taken regarding California’s Silicon Valley Bank and New York’s Signature Bank have lessened fears of contagion and a broader banking crisis.

Dahdah’s short-term outlook comes as gold prices test support just above $1,900 on Tuesday. April gold futures last traded at $1,911.90 an ounce, down 0.24% on the day. While off Monday’s highs, gold prices are still up more than 2% from Friday when government regulators first announced that the Federal Deposit Insurance Corporation (FDIC) would take over Silicon Valley Bank.

While risks have diminished, Dahdah said that they have not entirely disappeared and that they will support gold at a higher price. Natixis has raised its average gold price forecast to $1,830 an ounce, up from its initial 2023 forecast of $1,790 an ounce.

Dahdah said that the Federal Reserve’s monetary policy stance remains the most significant factor for gold. He explained that the potential for a larger banking crisis could keep the U.S. central bank from aggressively raising interest rates this year.

Gold price sees some modest profit taking, but holding above $1,900 as U.S. CPI rises 6% in February, in line with expectations

However, the Federal Reserve will walk a fine line between protecting the economy and cooling down inflation. Tuesday, the U.S. Labor Department said its Consumer Price Index saw a 6.0% annual rise in February. At the same time, core inflation rose 5.5% for the year, well above the central bank’s target of 2%.

According to the CME FedWatch tool, markets see an 82% chance that the Federal Reserve will raise interest rates by 25 basis points on March 22. There is a growing probability that the central bank will leave rates unchanged.

Expectations have dramatically shifted from last week when markets saw a nearly 80% chance of a 50-basis point rate hike.

Looking further out, markets are starting to price in a potential rate cut by late summer.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.