Gold has regained its glister, with the precious metal’s safe haven status reignited by recent problems in the global banking sector including the collapse of Silicon Valley Bank and Credit Suisse’s decline.
Weakness in the latest US economic data and rising expectations that the Federal Reserve may look to start cutting interest rates are the latest factors pushing gold towards its all-time high of $2,075, according to City Index and FOREX.com market analyst Fawad Razaqzada.
“Gold has jolted above $2,000 to reach a new high for the year, and silver has broken out above $24 resistance to close in on the $25 handle,” he said. “Both metals have been supported by renewed weakness in bond yields and the US dollar."
The dollar dropped sharply as the latest JOLT job openings data showed a fall of 632,000 to 9.9 million in February, according to the Bureau of Labor Statistics, the lowest level seen since May 2021 and short of market expectations for a print of 10.4 million, potentially indicating that the labour market may have finally started to cool.
Also, US factory orders fell 0.7% in February, according to the Census Bureau, below January's revised 2.1% decrease.
“The data raised concerns about a recession and thereby reduced the probability of further policy tightening from the Fed,” Razaqzada added.
IG chief market analyst Chris Beauchamp concurred that gold's latest surge followed the weaker US data.
“Gold continues to seize any opportunity for a rally, and this afternoon’s turn lower for the dollar has resulted in a 12-month high for the commodity,” Beauchamp said.
“2022’s theme of a rising dollar hit gold harder, but now as the greenback comes off and inflation eases, it looks like the metal’s time to shine has finally arrived.”
From a purely technical point of view, Razaqzada said gold’s current price action continues to point to further gains.
“We can’t entertain the idea of gold topping out until we see a concrete reversal signal,” he said.
“With gold now clearing the $2,000 hurdle, this has potentially paved the way for a continuation towards the March 2022 high at $2,070 and then the all-time high five bucks higher at $2,075, hit in August 2020.”
Contact the author at stephen.gunnion@proactiveinvestors.com