Gold drops on Advancing dollar

Gold drops on Advancing dollar

Gold drops on advancing dollar and some serious profit-taking by gold traders following last week’s bump as the markets continue to access banking risks.

The global banking crisis has nudged the Federal Reserve’s series of interest rate hikes from the front of investors minds amid widespread sentiment that the central bank will hold rates unchanged in May.

Some of the markets’ concern about the default banks – which drove gold prices up above $2,000 an ounce last week – has eased as regulators and acquirers have stepped in, but traders continued to watch the situation.

June gold futures gained 0.6% last week to settle at $2,001.70 an ounce on Comex, though the front-month contract fell 0.6% Friday. Bullion decreased 5.6% last month, its worst performance since June 2021. It increased 6.5% in January and gained 3.8% in December. The metal fell $2.40 in 2022. The June contract is currently down $34.4 (-1.72%) an ounce to $1967.30 and the DG spot price is $1950.90.

U.S. regulators are also considering additional support for lenders, and First Citizens BancShares Inc. agreed to buy all deposits and loans of Silicon Valley Bank, which triggered the crisis when it was seized by regulators a couple of weeks ago. It was the biggest bank to fail in more than a decade. 

In economic news, a key inflation report comes out this week, and multiple officials from the Fed are scheduled to speak. Investors will be closely watching for further indications of future direction from the central bank.

The Fed raised rates by another 25 basis points last week to combat soaring inflation. Any pause or halt in rate hikes would be seen as supportive for the precious metal since higher interest rates are typically bearish for gold.

About 65.0% of investors tracked by the CME FedWatch Tool are betting that the Fed will leave interest rates unchanged at the Fed’s next policy meeting in May, while 35.0% anticipate a 25 basis point increase. The Fed has raised rates by 25 basis points twice this year following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and5 November. 

The Fed’s favorite inflation measure, the personal consumption expenditures price index, is scheduled for release on Friday, with February data. 

Silver May futures gained 3.9% last week to settle at $23.34 an ounce on Comex after the metal increased 0.4% Friday. Silver retreated 12% last month after falling 0.8% in January and rising 10% in December. It advanced 3% in 2022. The May contract is currently down $0.264 (-1.13%) an ounce to $23.075 and the DG spot price is $22.96.

Spot palladium rallied 1.6% last week to $1,453.00 an ounce, though it retreated 0.2% Friday. Palladium plummeted 14% in February after dropping 7.4% in January and retreating 4% in December. It lost 5.7% in 2022. Currently, the DG spot price is off $18.40 an ounce to $1426.00.

Spot platinum rose 0.6% last week to $987.70 after slipping 0.4% Friday. Platinum retreated 5.9% in February after falling 4.3% in January and gaining 3.4% in December. It surged 10% in 2022. The DG spot price is currently down $7.50 an ounce to $979.50

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