Gold prices climbed above $2,000 an ounce on Tuesday to settle at their highest since mid-April as banking-sector worries lifted haven support for the precious metal ahead of Wednesday’s Federal Reserve policy decision.
Price action
-
Gold for June delivery
GC00,
+0.05% GCM23,
+0.05%
climbed $31.10, or 1.6%, to settle at $2,023.30 per ounce on Comex, the highest most-active contract finish since April 13, according to Dow Jones Market Data. -
Silver futures for July
SI00,
+0.39% SIN23,
+0.39%
tacked on 39 cents, or 1.5%, at $25.62 per ounce, also the highest settlement since April 13. -
Platinum futures for July
PLN23,
+0.15%
rose $13.60, or 1.3%, to $1,078.30 per ounce, while palladium futures
PAM23,
+0.31%
declined by $25.80, or 1.8%, to $1,421 per ounce. -
Copper futures for July
HGN23,
-0.04%
shed 7 cents, or 1.8%, to $3.86 per pound.
Market drivers
“Gold is rallying because the banking crisis, which had seemed to go away, has suddenly reawakened,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.
“Concerns that First Republic’s business practices were not much different than those at most banks today are sending regional-bank valuations plummeting and prompting investors to flood into safe havens like gold,” he said.
Read: White House says Biden is taking Banking turmoil ‘very seriously’
Meanwhile, the Fed on Wednesday is expected to raise its benchmark interest rate by another quarter of a percentage point in what could very well be the last rate hike of this cycle, economists said.
Robert Minter, director of ETF investment strategy at Abrdn, said gold could potentially reach $2,300 on “indications of a Fed pause in the hiking cycle,” pointing out that gold rose 70% after the Fed paused rate hikes in 2018.
Silver, meanwhile, may also benefit from a similar demand increase if the Fed pauses, the U.S. dollar weakens and gold prices rise, and if Chinese and European economies continue to outperform expectations and offset any U.S. weakness, he said.
Before Tuesday’s rally, prices for gold had been trading in a tight range around the $2,000 mark for more than a week.
“It’s not uncommon for market indices to consolidate around big round numbers,” said Tim Hayes, chief global investment strategist at Ned Davis Research, pointing out that this happened with gold when it reached $2,000 in both 2020 and 2022.
The gold market is telling us that the “Fed is close to ending its tightening cycle, and that bond yields will remain under pressure as economic growth slows down,” he said.
“Also considering the inverse correlation between gold and the U.S. dollar, gold’s rise and the dollar’s decline reflect the greater downward yield pressure in the U.S.,” he said. “The widening gap between U.S. and non-U.S. yields is a negative influence on the dollar, and that’s positive for gold.”
Hayes said he’s bullish on gold prices and expects new record highs as well as the “continuation of gold’s long-term uptrend.”
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