Gold futures closed at an 11-month high on Friday (17th) and recorded the largest increase in nearly three years, reflecting the unrest in the banking industry this week, prompting investors to buy gold as a hedge.
- New York gold futures for April delivery rose $50.50, or 2.6%, to $1,973.50 an ounce, the highest since April 18 last year.
- Gold futures surged 5.7% this week, biggest weekly gain since April 2020
Gold prices have rallied over the past week as investors flocked to safe havens amid mounting stress in banks across the Atlantic, supported by a softening in bond yields and the dollar.
Silicon Valley Bank (SVB) is no longer part of SVB Financial Group after last week’s run on it and the FDIC takeover. Two days later, Signature Bank was also shut down and taken into administration.
Credit Suisse, which has been troubled in recent years, is in full-blown crisis, with the Swiss National Bank (SNB) emergency borrowing as much as 50 billion Swiss francs ($54 billion) on Wednesday, helping to boost liquidity.
However, at least four major banks have imposed restrictions on transactions related to Credit Suisse, according to a new report from Reuters on Friday.
“Gold rallied on fears of more bad news from the banking sector this weekend and hopes that the Federal Reserve will pause interest rate hikes next week,” said independent metals trader Tai Wong.
The U.S. dollar, U.S. stocks and U.S. bond yields all fell, allowing gold to play a safe-haven role in times of economic uncertainty. In an environment of rising interest rates, since gold itself does not yield interest, the opportunity cost of holding gold increases.
The Fed will announce its decision in the early hours of next Thursday (22nd) Taiwan time, and the market expects to raise interest rates by another 1 yard (25 basis points), rather than the 2 yards of interest rate hikes expected before the collapse of Silicon Valley Bank.
Raffi Boyadjian, chief investment analyst at XM, said: “The market is speculating that the Fed will do what the European Central Bank (ECB) did this week, which is to raise interest rates (1 yard) as expected, and then pause shortly thereafter. Expectations of an imminent end to the interest rate cycle are weighing on the dollar.”
The ECB raised interest rates by 2 yards this Thursday, in line with market expectations, but this time it did not provide forward guidance, only saying that future interest rate hikes depend on the development of economic data. Some have speculated that stability issues at US regional banks and Credit Suisse may have prompted the ECB to pause in rate hikes.
The ICE U.S. Dollar Index (DXY) fell 0.6 percent to 103.81 on Friday, with the policy-sensitive two-year U.S. Treasury yield slipping to 3.90 percent from 4.13 percent on Thursday.
The U.S. Consumer Confidence Index in March released on Friday fell to 63.4, the first decline in four months, reflecting the concerns of the American people about high inflation and economic health. Meanwhile, leading indicators fell 0.3% in February, the 11th straight monthly decline, continuing to signal that a recession is imminent.
Comex Metals Commodities Trading
- Silver futures for May delivery rose 77 cents, or 3.5%, to $22.46 an ounce, up 9.5% for the week.
- Copper futures for May delivery rose 3 cents, or 0.7%, to $3.893 a pound, having shed 3.4% for the week.
- Platinum futures for April delivery rose $1.50, or 0.1%, to $978.60 an ounce, up 1.7% for the week.
- Palladium futures for June delivery fell $23.20, or 1.7%, to settle at $1,386.10 an ounce, up 1.8% for the week.
Tags: Precious Metals Hours Banking turmoil continues gold closes #11month high soars week Anue tycoon