Gold prices fall from $2000 mark as investors gauge banking risks

Gold prices fell on Monday as investors booked profits after the asset rose above a one-year peak of over $2,000 earlier in the day, amid banking fears and increasing bets of a rate pause by the Federal Reserve.

Spot gold was down 0.6% at $1,975.33 per ounce, as of 1035 GMT. U.S. gold futures jumped 0.8% to $1,988.90.

Prices fell over 1% before climbing by the same amount to the metal's highest level since March 2022 at $2,009.59, just shy of a record set during the onset of the pandemic.

"Gold continues to see safe-haven demand due to the banking crisis and tensions in the market. Also, the increased expectation for the Fed to be less aggressive with rate hikes is helping prices," said Carlo Alberto De Casa, external analyst at Kinesis Money.

"If the banking crisis worsens, then gold might hit record-high levels," De Casa said, adding the market is seeing profit-taking after hitting a high of $2000, a key resistance level.

Amid an ongoing banking crisis, investors will keenly watch a Fed policy decision due on Wednesday. Traders are now pricing in a 59% chance of the Fed holding rates in the current range.

Gold is considered a safe-haven asset during times of financial uncertainty, while lower interest rates reduce the opportunity cost of holding the non-yielding bullion.

Prices have rallied more than $100 after the collapse of U.S.-based Silicon Valley Bank earlier this month, which ensnared 167-year-old lender Credit Suisse.

European stocks bounced off early lows as utilities and miners gained, offsetting some losses in bank stocks that were sparked by UBS' shotgun deal to buy Credit Suisse for a fraction of its market value.

"In light of high global financial turbulence, we expect significant price volatility in the coming weeks. Nevertheless, we expect gold prices to remain elevated," Fitch Solutions said in a note.

Among other metals, spot silver dipped 0.8% to $22.41 per ounce. Platinum rose 0.1% to $976.98 and palladium was 0.9% lower at $1,406.99.