scorecardresearchGold stable after banking crisis stokes 5% rally over three days

Gold stable after banking crisis stokes 5% rally over three days

Updated: 14 Mar 2023, 09:01 AM IST
TL;DR.

The fallout from Silicon Valley Bank’s collapse, combined with a 1% decline in the dollar index over the past two trading days, has spurred a resurgence for gold. Its 2.4% gain on Monday was the biggest one-day jump since November.

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(Bloomberg) -- Gold was little changed after surging more than 5% in the three previous sessions as traders turned to haven assets amid the widening US banking crisis.

The fallout from Silicon Valley Bank’s collapse, combined with a 1% decline in the dollar index over the past two trading days, has spurred a resurgence for gold. Its 2.4% gain on Monday was the biggest one-day jump since November. 

While gold has traditionally been used as a safe-haven hedge during times of financial turmoil, in recent years the non-interest bearing metal’s direction has usually been more influenced by the greenback, moving in reverse to the currency. This week, bullion has been bolstered by a combination of the banking collapse shock, a weaker dollar, and fresh expectations the Federal Reserve will be forced to temper aggressive monetary tightening.

Traders will still be closely watching US inflation data later Tuesday, with the market now expecting the banking-sector turmoil will prompt the central bank to implement a quarter-point hike at its March 21-22 policy meeting, rather than return to a half-point increase. 

Drivers for gold include “concerns about potential systemic risk” as potential deflationary and recessionary risks mount, Citigroup Inc. analysts including Aakash Doshi said in a note. While the CPI data “remains critical, we view recent market events as more structurally supportive for gold prices,” it added.

Spot gold slipped 0.1% to $1,911.79 an ounce as of 8:34 a.m. in Singapore. The Bloomberg Dollar Spot Index was flat. Silver was little changed after Monday’s 6.2% surge, while platinum and palladium declined.

 

First Published: 14 Mar 2023, 09:00 AM IST