Gold prices hit a second yearly high on Wednesday as investors sought out safe-haven assets on news of further struggles among US regional banks.
Gold reached US$2061.39 per ounce in the evening, according to Trading Economics, as news struck that US lender Pacific Western Bancorporation was seeking out a rescue deal.
This marked a 3.6% rise on Monday morning’s price of £1988.03, with spikes occurring in the wake of First Republic’s sale to JP Morgan Chase & Co and PacWest’s news.
California-based PacWest instructed investment bank Piper Sandler to help with exploring strategic options or even a sale on Wednesday evening, leaving investors “worried that it will be the next domino to fall,” Hargreaves Lansdown analysts noted.
Analysts largely cited banking wobbles, which have already consumed US regionals Silicon Valley, Signature and First Republic in the past two months, as key drivers for gold prices.
“There is a strong negative correlation between the US yields and gold’s valuation,” Swissquote analyst Ipek Ozkardeskaya said.
“The upside potential depends mostly on what will happen on the US yields front,” she added, which fell following the US Federal Reserve’s announcement a 0.25% interest rate hike on Wednesday would be the last.
However, ING analysts downplayed the effects of the announcement, commenting: “The point here is that the 15-base point decline in US two-year yields overnight seems to have been driven by the banking crisis - not the Fed.”
Bitcoin, another digital safe haven, also rose on Wednesday night, climbing 2.9% in two and a half hours between 8pm and 10:30pm.
Ozkardeskaya added: “A potential escalation in bank stress could support gold, but gold needs persistent downside pressure in the US yields to reach and to breach the US$2100 resistance.”
PacWest shares sat 43.5% lower on Wednesday’s US opening meanwhile, with peers Western Alliance and Metropolitan Bank marking falls of 22.5% and 5.2% respectively.