AGE Daily Gold Update

AGE Daily Gold Update presents a recap on today's action in the precious metals markets. View archives.

3/20/2023: Gold rallies on banking jitters

Source: Bill Musgrave, American Gold Exchange

Austin — Extending last week's 5.7% rally, gold rose another 0.5% to close near $1,983 as the dollar retreated further and jitters remained over the stability of the global banking system despite interventions by governments and the private sector.

Swiss banking giant USB agreed to acquire the failing Credit Suisse in a deal engineered and backstopped by the Swiss government and Swiss National Bank. The recue comes in the wake of serious stress in the US banking sector bought on by the rapid failures of Signature Bank, Silvergate, and Silicon Valley Bank.

After a brief respite last week, shares of First Republic Bank again tumbled more than 30% as investors feared that the $30 billion rescue provided by a consortium of major US banks would be inadequate.

The most aggressive rate-hike cycle in a generation has caused massive losses in bond portfolios and extreme stress on over-leveraged companies faced with renewing debt at higher rates. Investors remain worried that the recent bank failures are just the first dominos to topple.

Still, Wall Street rebounded on relief about the USB rescue, lifting the Dow and S&P 500 1.1% and 0.8% higher, respectively, while the Nasdaq rose 0.3%.

The dollar fell 0.4% against major rivals, supporting gold and other commodities by making them less expensive in other currencies, lifting demand overseas.

A shifting view on interest rates also supported gold and weighed on the dollar. According to CME FedWatch, Fed fund futures traders now see a 73% chance of a quarter-point rate hike at the Fed's meeting this week, followed by another hike of the same size in May. But after these two increases, the Fed is expected to pause and then start cutting rates by summer, a far more dovish outlook than just a few weeks ago.

Benchmark US Treasury yields crept back above 3.4% risk appetite returned, limiting gold's gains by increasing the opportunity cost for holding it instead of bonds.

The other precious metals were also higher, with silver adding 0.8% while platinum picked up 1.7% and palladium rose 1.1%.

At the Comex close: April gold gained $9.30 to $1,982.80; May silver rose 18 cents to $22.65; July platinum picked up $16.50 to $997.40; and June palladium advanced $14.50 to $1,400.60 an ounce.