Gold prices blasted through all-time record highs this week after signs of a deepening banking crisis added further fuel to the precious metals unstoppable rally.

Gold prices surged after the Federal Reserve raised its benchmark interest rate by a quarter of a percentage point on Wednesday – to a new range of 5% to 5.25%, the highest level since mid-2007. 

The Fed’s tenth consecutive interest rate hike in just over a year, sent shockwaves through the financial system, triggered a significant sell-off in the broader banking sector.

Back when interest rates were near zero, global banks scooped up record amounts of Bonds. But as traders know – when interest rates go up, bond values go down.

That’s one of the reasons why a whole lot of banks have landed themselves in deep trouble.

The Fed's rate increases have meant that bonds held by banks have fallen in value and are now trading significantly below what the banks paid for them. Currently, the value of unrealized losses in the portfolios of some of the most widely-recognized banks on Wall Street is an estimated $1.84 trillion – and that number is growing by the day. 

This week, shares of First Horizon Bank, Western Alliance, Zions Bancorp, Comerica and KeyCorp plunged by almost 40%. But the biggest casualty was PacWest. Concerns that PacWest could be the next domino to fall – has seen the lender's shares fall over 50% in recent days and by more than 90% year-to-date.

It is often said that confidence in a financial institution is built over decades and destroyed in days. As each domino falls, the next weakest bank begins to wobble.

In summary, that's the exact situation we’re seeing unfold right now. 

One of the biggest beneficiaries of the current financial climate has undoubtedly been Gold. On Thursday, Gold prices hit an all-time high of $2,082 an ounce, breaking its previous record of $2,075 an ounce reached in August 2020. 

Since the final quarter of 2022, Gold prices have been on a parabolic run – taking their gains to over 32% from the November lows of $1,600 an ounce. 

And the rally might not stop there! 

In many ways, this monumental move was already on the cards after Google searches for the phrase “How To Trade Gold” hit their highest level on record ever. 

Whichever way you look at it, one thing is clear. The current macroeconomic backdrop is fuelling a “perfect storm” for Gold. That’s welcoming news for the bulls, but painful for anyone sitting on the side lines, who must now decide how much FOMO they can handle. 

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

 

Trading has large potential rewards, but also large potential risk and may not be suitable for all investors. The value of your investments and income may go down as well as up. You should not speculate with capital that you cannot afford to lose. Ensure you fully understand the risks and seek independent advice if necessary.

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