Gold hits 11-month high as U.S. banking crisis feeds safe havens

By Barani Krishnan -- Gold hit 11-month highs, breaking from the clutches of mid-$1,900 pricing to head for bullion bulls’ long-term target of $2,000, as the U.S. banking crisis drove more investors towards safe havens on Friday.

“The return of bank angst is sending gold prices sharply higher,” said Ed Moya, analyst at online trading platform OANDA. “Many gold investors are looking at the short-term macro risks and it seems that a wide range of expectations should mostly be positive for bullion.”

The front-month April gold futures contract on New York’s Comex settled at $1,973.50 an ounce, up $50.50, or 2.6%. The session high was $1,980.50, a peak since the $1,985.10 registered on April 19, 2022. For the week, April gold was up by a whopping $106.30, or 5.7%.

The spot price of gold, more closely followed than futures by some traders, was at $1,973.92 by 13:55 ET (17:55 GMT), up $54.37, or 2.8%. The session high for spot gold was $1,975.24, also marking an 11-month high.

Spot gold’s charts indicated that a test of $2,000 was possible, so long as the current momentum held, said chartist Sunil Kumar Dixit.

“Today's insane rally in gold shows that more people are turning to gold as a safe haven and store for value as the banking credit crisis continues to grow and spread,” said Dixit, chief technical strategist at SKCharting. “From this point on, so long as prices sustain above $1,960, we can witness a continuation of the momentum reaching for the psychological barrier of $2,000.”

The last time spot gold peaked at above $2,000 was in March 2022 when it hit $2,070.29, virtually matching the record high of 2,072.90 from August 2020, data shows.

Gold prices have been on a tear since the U.S. banking crisis erupted a week ago with the takeover of two mid-sized lenders — Silicon Valley Bank and Signature Bank — by the Federal Deposit Insurance Corp as depositors yanked billions of dollars from them after fearing for their solvency. Silicon Valley filed for bankruptcy protection over the past 24 hours. A third bank, First Republic, is also in trouble despite receiving a $30 billion cash infusion from a consortium of banks.

Elsewhere, the banking crisis has spread to Europe, with Credit Suisse Group (NYSE:CS), one of the preeminent names in global investment banking, having to seek help from Switzerland’s central bank.

Persistent interest rate hikes by the Federal Reserve have also led to fears that the U.S. economy could end up in a deep recession.

Whichever way the central bank goes now could be a boon for gold, said OANDA’s Moya.

“If the Fed is done with rate hikes, that should be bullish for gold as it puts a short-term cap on the dollar. If inflation proves to be stickier and the Fed has to resume tightening, that would deliver a major blow to the economy and trigger many safe-haven flows for gold.”

He said gold could hover at around $1,950 leading up to the Fed’s next rate decision on March 22, adding that Wall Street might have a better handle after that on how bad a recession the U.S. may be facing. “Safe-haven flows into gold should be steady as the economy enters a recession,” he added.

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