Gold Hits Key $1,900 on US Lender Silicon Valley Bank Uncertainty. Gold hit the key $1,900 level earlier this week on speculation that the Federal Reserve will pause interest rate hikes. Also, market participants sought shelter from uncertainty sparked by the collapse of US lender Silicon Valley Bank.

Gold Price Increase


Spot gold prices rose 1.89% to $1,903.35 an ounce, while US gold futures rose 2.33% to $1,910.50.

Silicon Valley Bank Closing


Gold rose 2% on Friday after California regulators shut down tech startup-focused Silicon Valley Bank. Regulators also shut down New York-based Signature Bank on Sunday.

Gold as a Safe-Haven Asset


"Recent events show that gold remains a safe-haven asset as it can benefit from market uncertainty. Also, market participants expect rising interest rate expectations to lift gold prices," said UBS analyst Giovanni Staunovo.

Market Players' Expectations


Following the Silicon Valley Bank collapse, market participants now expect the Federal Reserve to hold off on raising its overnight interest rate by 50 basis points this month, up from a 70% probability before the crisis. A rate cut has also been priced in for late 2023.

Institutional Money Enters the Market


The rise in gold prices suggests some institutional money is coming into the market. However, it is uncertain whether this trend will be reflected in exchange-traded funds (ETFs), as noted by Philip Newman of Metals Focus.

Simultaneous Decline in Dollar Index


Gold also found further support from a simultaneous decline in the dollar index, making bullion cheaper for overseas buyers.

US Actions to Combat Financial Collapse


Meanwhile, U.S. officials announced a series of measures to combat the financial fallout from the collapse of Silicon Valley Bank. However, a broader stock market selloff continued in European markets.


 



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Conclusion


Uncertainty sparked by the collapse of US lender Silicon Valley Bank and market participants’ expectations of an interest rate hike pushed gold prices higher. Gold remains a safe-haven asset and is getting support from a simultaneous decline in the dollar index. While institutional money is coming into the market, it is uncertain whether this trend will be reflected in exchange-traded funds (ETFs).


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