Gold exceeded $1,900 as investors seek refuge from the uncertainty caused by the Silicon Valley Bank bankruptcybut were encouraged by bets that the Federal Reserve may be forced to moderate rates.
Spot gold rose 2.4% to $1,921.06 an ounce, the highest level since early February. US gold futures gained 2.6% to $1,916.50.
The US dollar and Treasury yields extended their falls despite efforts by regulators to rein in the turmoil at Silicon Valley Bank and Signature Bank.
“Gold appears to be fulfilling its safe-haven mandate, with short coverings supporting long exposures”said Bart Melek, head of commodity markets strategy at TD Securities.
Other precious metals followed suit: Silver rose 6.3% to $21.81 an ounce, platinum jumped 4% to $997.60, and palladium rose 7.8% to $1,485.74.
“Many investors are looking to precious metals for a haven from volatility and risk … in an environment of much lower interest rates and a declining US dollar,” which is driving up their prices, he said. Melek.
Traders are no longer expecting a 50 basis point rate hike from the Federal Reserve next week and the current forecast is for a 25 basis point move.with some even anticipating none at all, making gold more attractive as it earns no interest.
“The future of gold prices largely depends on whether the Federal Reserve’s actions prove effective. If the Silicon Valley Bank (SVB) bankruptcy is seen as an isolated incident, gold could lose some of its recent gainssaid Alexander Zumpfe, a precious metals trader at Heraeus.
“However, if the crisis leads to a sustained Fed reversal, gold could continue to be in demand”he added.
Source: Ambito
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