Gold and silver prices are rising strongly, with gold hitting a five-week high and silver a three-week high at mid-day in the US on Monday on safe-haven demand amid a shaky overall market. Gold increased by $42.50, to $1,909.90, and silver increased by $1.419, to $21.92, according to the specialized platform Kitco.
Anxiety among traders and investors is high at the start of the trading week after a turbulent weekend following the collapse late last week of Silicon Valley Bank, the 16th largest bank in the US. The federal government has said it will support all depositors of the failing bank. Other smaller US banks are reported to be struggling due to depositor withdrawals. Government regulators have also taken over Signature Bank, which serves many cryptocurrency companies.
To show just how much this event shook the overall market, Goldman Sachs is now predicting that the Federal Reserve will not raise US interest rates at next week’s FOMC meeting. “When the Fed raises rates that fast, nine times out of ten, things break. We may see more corporate bankruptcies; we may see more regional banks collapse,” one analyst said of the market in an article published today in the Wall Street Journal.
Global stock markets were mostly lower overnight, while US stock indexes are up at midday. US Treasury prices are also up solidly (yields falling) on the back of flight-to-quality buying. Meanwhile, Bitcoin prices are surging.
Of course, fear in the market is a contagion effect and a crisis of confidence among investors and the general public. The next two days will be critical to gauge the stress of the investing public and the general public.
What to watch for in the next few days
US President Biden made a televised appearance in an attempt to calm very jittery stock and financial markets. However, as Biden spoke, futures prices for US Treasuries and notes soared, driven by purchases of US Treasuries in search of quality. During times of high trader anxiety, the US Treasury markets are considered the ultimate sanctuary of refuge for many traders and investors.
The price of gold is also seeing strong haven demand and is at a five-week high above $1900 an ounce. Meanwhile, the price of crude oil is falling and has hit a three-month low on concerns the US financial crisis will hurt global economic growth. The US dollar index also sold off strongly in the last two trading sessions.
Over the next couple of days, the most important market to watch for traders of all markets is the US Treasury market. An old market adage says that bond traders are the smartest guys/women in the room. The benchmark 10-year US Treasury yield currently stands at 3.504%, down significantly from levels that recently topped 4.0%. If US Treasury prices continue to rise sharply (yields fall sharply), this will be an indication that tensions in the US financial system are increasing. Expect gold, silver and other market traders to be guided by what happens in the US Treasury markets over the next few days.
In key foreign markets today, the US dollar index is sharply lower after hitting a three-month high last week. Nymex crude futures prices are lower and are trading around $76.00 a barrel.
Copper closed today up 220 points at 405.30 cents. Prices closed closer to session highs and touched a nine-week low early in the session. Prices marked a day of upward external growth today.
