Gold prices continued to rise on Monday with the hit to the US dollar on sinking yields in the wake of the Silicon Valley Bank (SVB) crisis along with safe-haven demand from investors strengthening the yellow metal.
Gold prices had risen 2.6% to US$1,915.90 per ounce late morning on Monday, while the price of silver was up 6.8% at US$21.91 per ounce.
Stifel GMP analysts noted that gold prices had risen sharply despite last week’s stronger-than-expected non-farm payrolls (NFP) print on Friday, driven by safe-haven demand as the market is concerned about the wider impact of the SVB collapse.
TickMill Group market analyst James Harte added that the metals market had started the week on a positive footing, with the main driver behind the move the shift lower in the USD in response to economic data and the events surrounding SVB in recent days.
He said, while the NFP came in above forecasts, an unexpected uptick in the unemployment rate and weaker-than-forecast wages data were seen as providing an argument for the Federal Reserve sticking to a further, smaller 25 basis points interest rate hike this month.
However, he noted that Fed expectations have also shifted materially in response to the unfolding SVB crisis.
“The sudden collapse of the bank at the end of last week has raised fresh concerns over the health of the US financial sector,” Harte said.
“With fears that other lenders might be close to collapse also, the market is expecting a less hawkish stance from the Fed. Indeed, we’ve heard some players such as Goldman suggesting that the Fed won’t hike at all this month as it monitors the situation around SVB.”
Looking ahead this week, Harte highlighted Tuesday’s US CPI data as key for metals traders, along with incoming news-flow round SVB.
“CPI is forecast to have cooled last month which, if confirmed, should further strengthen the likelihood of a smaller Fed rate hike this month,” he said.
“In this scenario, the USD should head further lower, allowing metals room to continue climbing.”
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