Gold prices rose today, Friday, heading to record the best monthly performance since July 2020, as the banking system crisis led to the expectation that the Federal Reserve (the US central bank) would temporarily stop raising interest rates, which makes the yellow metal more attractive.
In morning trading, gold rose in spot transactions by more than 0.1%, to 1981.7 dollars an ounce, while US gold futures rose 0.1%, to 1982.00 dollars.
The precious metal is heading for its second consecutive quarterly gain, up 8.6% so far.
On the other hand, the dollar is heading to incur a second consecutive quarterly loss, which makes gold cheaper for buyers abroad.
Gold crossed the $2,000 level after the sudden collapse of two US banks earlier in the month, raising bets that the Federal Reserve might stop raising interest rates to avoid broader repercussions of the global banking system turmoil.
However, prices fell after a short period of time due to the intervention of the authorities to the rescue.
Although gold is considered a hedge amid economic uncertainty, higher interest rates tend to weaken its attractiveness because it does not generate a return.
speculation
Ilya Spivak, head of the macroeconomics department at Tastylive, said there is speculation that “the banking crisis may not be over yet, but the problems are not visible or affecting the markets at the moment. Therefore, gold is holding between 1930 and $2,000.” .
Spivak added that gold faces downside risks because the market expects the Federal Reserve to temporarily stop raising interest rates, which contradicts what the US Central Bank says and may contradict upcoming data.
Markets are awaiting the PCE data, seeking more evidence of the US central bank’s next move.
Among other precious metals:
- Silver settled in spot transactions at $23.87 an ounce.
- Platinum also settled at $986.12.
- Palladium fell 0.5% to $1,457.39.
The dollar is falling
The dollar is heading towards recording a second consecutive quarterly loss today, Friday, while investors see that US interest rates are close to peaking.
It seems that modest support resulting from the demand for safe havens in mid-March is about to end, after concerns about the banking sector rocked global markets.
The dollar index fell 1.3% during the first quarter of the year.
Société Générale analysts said in a note, “The dollar is likely to remain range bound until the impact becomes more apparent, but if US interest rate expectations continue to be reassessed, there will be further decline.”
The euro rose 0.5% overnight after stronger-than-expected inflation data in Germany boosted expectations of further rate hikes in the eurozone.
- In the latest Asian trading, the euro rose slightly to $1.0908.
- The dollar rose 0.2% against the yen to 133.07 yen.
- The New Zealand dollar recorded its highest level in almost two weeks at $0.6296, while it fell about 1% during the first quarter of the year.
- The Australian dollar rose 0.2% to $0.6721, but it remains down about 1.3% during the quarter.
- The British pound increased 0.1% to $1.2400 and is looking forward to a quarterly gain of 2.5%, as investors believe that severe British inflation will require more rate hikes to curb it.
