$150 increase in gold prices since Silicon Valley Bank crisis: Gold Bullion

Daily News Egypt
6 Min Read

The gold price exceeded $2000 per ounce for the first time since March 2022, to continue the exceptional performance of the precious metal and attract more investments in light of the widening uncertainty in the financial markets due to the banking crisis despite the reform measures by decision makers, until the time of writing the Gold Bullion report.

Gold traded at the time of writing the report at $1985.80 per ounce, after recording the highest level in almost a year at $2009.69 per ounce, and gold was able to record three consecutive weeks of rise, after playing the role of a safe haven in markets that witnessed fears and risk-averse since the resounding fall of Silicon Valley Bank and Signature Bank in the United States of America before the infection spread to the Swiss banking giant Credit Suisse.

Gold was able to achieve gains of about $150 since the announcement of the collapse of the Silicon Valley bank, after which the markets lost confidence in the banking sector, and the demand for gold accelerated as a safe haven in the markets, breaking records during the recent period.

On the other hand, the US dollar tried to achieve some gains today against the major currencies, but it soon lost the upward momentum in favour of gold, so that the dollar index, which measures the performance of the federal currency against a basket of 6 major currencies, traded at the same price as the opening price of today’s session at 103.39 without achieving any gains. 

The weekend in the global financial markets witnessed the completion of one of the largest banking deals in history, which is the acquisition by Swiss bank UBS of its troubled competitor Credit Suisse in a deal amounting to CHF 3bn($3.23bn), provided that UBS will bear losses of up to to $5.4bn.

The acquisition deal was made by the Swiss government and the Swiss Central Bank in an attempt to save Switzerland’s global financial reputation and achieve stability and calm in global financial markets and the banking sector.

It is worth noting that both US Federal Reserve Governor Jerome Powell and US Treasury Secretary Janet Yellen announced that they welcomed the acquisition deal between the two banks or that this is the best solution and stressed that the financial position and the volume of liquidity in the US banking system are strong and the system as a whole is sufficiently flexible.

Also, the central banks of the Group of Seven met yesterday evening, Sunday, to discuss joint measures to enhance liquidity in the global banking sector, in an attempt to save the panic that afflicted global financial markets since the fall of the Silicon Valley and Signature banks in the United States, and then the resounding fall of the Swiss Credit Suisse Bank.

The meeting of the central banks witnessed a discussion between the US Federal Reserve and the rest of the banks about coordinating mechanisms for providing permanent cash liquidity in US dollars to limit the repercussions of the tightening monetary policy pursued by global central banks, with the exception of the Japanese central bank.

Expectations were before the opening of the financial markets today that this huge banking event would contribute to pushing gold prices to decline, due to the return of calm to the markets due to the acquisition process, but gold continued to rise and breached the psychological level of $2000 an ounce, in confirmation of the change in the direction of investor confidence in the financial markets in a significant way. complete.

Global financial markets are awaiting this week the Federal Reserve meeting, which will announce its results next Wednesday, with main expectations of raising interest by 25 basis points, and everyone is looking forward to knowing the next step of the Federal Bank, especially since expectations indicate that the bank will only raise a quarter of a percentage point before stopping at this stage, especially after the apparent damage to the banking sector as a result of the tightening of monetary policy and the continuous interest rate hikes.

Turmoil in the banking sector that threatens to spread to the rest of the economy has boosted demand for gold as a safe haven in recent weeks, prompting the yellow metal to breach the psychological level of $2,000 an ounce.

Fears of a US banking crisis stimulated large inflows into gold, especially after the collapse of Silicon Valley Bank. This has also caused investors to start pricing in that the Fed will be less hawkish in the coming months as the Fed races to stem further pressure on the economy from previous rate hikes.

The yield on two-year US government bonds fell by 3% to its lowest level since September last year at 3.6511%, which is closely linked to US interest rate expectations.

This significant decline in the yield on government bonds had a great support for gold, which continued to attract investments away from the bond markets during the current period due to fears in the financial markets.

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