Gold rises on banking crisis

Gold rises on banking crisis

Gold rises on banking crisis, rallying early Friday, heading for its biggest weekly rally since November, as the global banking crisis sent investors to the precious metal as a hedge against uncertainty.

The Federal Reserve and Treasury Department announced emergency measures to shore up banks Monday after the collapse of Silicon Valley Bank, closely followed by the seizure of Signature Bank. Then on Tuesday, Credit Suisse said it had identified material weaknesses in its financial reporting. But Swiss National Bank quickly indicated it was prepared to lend it $54 billion. And large U.S. banks injected $30 billion in deposits into First Republic Bank on Thursday to rescue the lender. 

The banking crisis overshadowed, but didn’t completely overcome, speculation about next week’s Fed meeting, at which policymakers are widely expected to boost interest rates by 25 basis points, the latest in a series of rate hikes to curb inflation. The February consumer price index report on Tuesday, showed that inflation remained elevated in February, but in line with expections. The European Central Bank raised rates by 50 basis points Thursday. Interest rate increases are typically bearish for gold because they make the yellow metal less attractive as an alternate investment. 

June gold futures slipped 0.4% Thursday to settle at $1,939.70 an ounce on Comex. The front month contract, which rolled to June from April this week, gained 3.9% in the first four days of the week. 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 up $28.1 (+1.45%) an ounce to $1967.80 and the DG spot price is $1950.80.

About 74.5% of investors tracked by the CME FedWatch Tool are betting that the Fed will boost rates by 25 basis points at policymakers’ next meeting March 22. The remaining 25.5% of investors are anticipating rates to remain unchanged. A week ago, 59.8% of investors 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. 

Silver May futures decreased 0.9% Thursday to settle at $21.69 an ounce on Comex, though the front-month contract is up 5.8% so far this week. 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 up $0.428 (+1.97%) an ounce to $22.120 and the DG spot price is $22.01.

Spot palladium dropped 2.9% Thursday to $1,451.50 an ounce, though it’s up 4.6% so far this week. Palladium plummeted 14% in February after dropping 7.4% in January and retreating 4% in December. It lost 5.7% in 2022. The current DG spot price is slightly down, $0.30 an ounce, to $1444.00.

Spot platinum increased 1.3% Thursday to $981.20 an ounce and is up 1.5% in the first four days of the week. Platinum retreated 5.9% in February after falling 4.3% in January and gaining 3.4% in December. It surged 10% in 2022. Currently, the DG spot price is up $13.50 an ounce to $991.30.

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