Safe-haven gold accelerates as traders assess SVB fallout

Gold raced towards the key $1,900 level on Monday as investors sought cover from the uncertainty triggered by the collapse of Silicon Valley Bank, emboldened by bets that the Federal Reserve may now have to tone down its rate hikes.

Spot gold was up 0.9% at $1,885.37 per ounce, as of 0904 GMT. Earlier in the session, prices hit their highest since early Feb at $1,893.96. U.S. gold futures gained 1.2% to $1,889.50.

On Friday, gold gained 2% after California regulators closed tech startup-focused Silicon Valley Bank (SVB). Regulators also shuttered New York-based Signature Bank SBNY.O on Sunday.

“Recent events show that gold remains a safe haven asset as it is able to benefit from market uncertainty. Also, market participants pricing out rate hike expectations is lifting gold,” said UBS analyst Giovanni Staunovo.

Lower interest rates decrease the opportunity cost of holding zero-yield gold.

After the SVB collapse, traders now expect the Fed to no longer raise interest rates by 50 basis points this month, in contrast to a 70% probability before the event. Rate cuts have also now been priced in by end-2023.

Goldman Sachs on Sunday said they no longer expect the Fed to deliver a rate hike at its March 22 meeting. Gold found further tailwinds from the simultaneous retreat in the dollar index, which made bullion cheaper for overseas buyers. [USD/]

Meanwhile, U.S. officials announced a series of measures to battle the financial fallout from SVB’s collapse, but a wider stocks market sell-off continued into European markets. [MKTS/GLOB]

“The near-term path (for gold) remains difficult to predict, it will be dependent on the upcoming U.S. economic data, such as the CPI data (on Tuesday),” Staunovo added.

Silver added 1.4% at $20.80 per ounce, platinum was 0.7% higher at $966.29 and palladium climbed 1.1% to $1,393.38.