Gold leaps over $1900 this morning, rising to its highest level in more than five weeks early Monday as the sinking dollar and nervousness in the markets over the largest bank collapse since 2008 made the yellow metal more attractive as a hedge against uncertainty.
The collapse of Silicon Valley Bank on Friday and subsequently Signature Bank on Sunday caused the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. to announce measures Sunday to shore up confidence in the financial system.
The bank failures brought concerns about the financial system to the forefront for investors who have been focused on upcoming interest rate hikes from the Fed. The closely watched U.S. jobs report for February showed last week that unemployment rose and wage growth slowed, even as the total number of jobs increased, trimming expectations of the size of the next rate hike.
Front-month gold futures rose 0.7% last week to settle at $1,867.20 an ounce on Comex after the April contract surged 1.8% 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 April contract surged $45.4 (+2.43%) an ounce to $1912.60 and the DG spot price is $1907.20.
The new measures announced by the Fed, the Treasury and the FDIC are designed to protect the nation’s bank deposits amid fears that the situation will spread. But the banking situation pressured the dollar, bolstering gold, which became more attractive to holders of foreign currencies.
On the employment front, the U.S. added 311,000 jobs in February, more than analysts expected, even as the Fed continued to hike interest rates. A tight jobs market would indicate that it’s strong enough to handle larger interest-rate increases. But the softness in unemployment and wage growth put a damper on that speculation.
Investors tracked by the CME FedWatch Tool altered their bets on how much the Fed will boost rates by at policymakers’ next meeting March 22 after the jobs report came out. The tool shows 84.9% of investors expecting a 25-basis-point hike, with the remaining 15.1% betting on the Fed keeping rates unchanged. Friday, 59.8% were anticipating a 25 basis-point hike, with 40.2% predicting a 50 basis-point rise.
The Fed raised rates by 25 basis points Feb. 1 following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November to try to rein in skyrocketing inflation. The Fed’s favorite inflation measure, the U.S. personal consumption expenditures price index, unexpectedly accelerated in January.
Silver May futures decreased 3.5% last week to settle at $20.51 an ounce on Comex, though the front-month contract rallied 1.7% 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 up $1.019 (+4.97%) an ounce to $21.525 and the DG spot price is $21.62.
Spot palladium dropped 5.8% last week to $1,388.00 an ounce after falling 2.5% 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 has jumped up $70.70 to $1473.00.
Spot platinum decreased 1.7% last week to $966.40 an ounce, though it gained 1.3% 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 up $39.00 to $1005.20.
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