Problems in the U.S. banking sector have indeed subsided, as forecasted yesterday. However, Europe has provided a new cause for concern. Credit Suisse Group AG, which is the second largest bank in Switzerland, has started to face credibility issues. The bank's shares plummeted by 30% during yesterday's session. Credit Suisse turned to the Swiss National Bank for 50 billion francs ($54 billion) in an effort to stop the confidence crisis that shook the global financial system.
Unlike the regional banks in the U.S., Credit Suisse is systemically important and much more significant globally. Attempts will be made to save this bank at any cost, otherwise global stability will be in doubt. Central banks will provide any amount of liquidity just to keep the bank afloat. Gold is the first to benefit from such actions, so it's worth expecting its new efforts to grow in the nearest future.
The news background is still extremely optimistic for gold. More and more analysts are predicting a renewal of historic highs.
Jonathan Butler, precious metals strategist at Mitsubishi Corporation, described the bankruptcy of U.S. banks as a turning point for hawkish monetary policy. He noted that gold is in a strong position, as high demand for safe haven assets has led to a significant decline in bond yields.
According to TD Securities strategists, the market may see another rally in the yellow metal.
Concerns about the liquidity crisis in the U.S. are reduced due to increased demand for physical gold. Discretionary traders are also taking a neutral position, contributing to an increase in safe haven assets purchases.
Yesterday, gold updated local highs, then there was a pullback to the level of previous consolidation. Today, a new growth attempt is visible above the rectangle formed during last trading sessions. The local maximum at the level of $1937 can become the growth target. A stop-loss could be placed at the point of decrease to the lower border of the rectangle, which is the level of $1899.
A Gold price rise:
Take profit – 1937
Stop-loss – 1899
This content is for informational purposes only and is not intended to be investing advice.