At the start of the week, a troy ounce of .999 fine gold was trading at $1,813 per unit. Seven days later, gold rose 9.65% against the U.S. dollar to the current spot price of $1,988 per ounce. Gold’s rise comes at a time when confidence in the global banking system is at an all-time low, and five major banks have received bailouts. An ounce of fine silver also increased in value, rising more than 12% from $20.01 to $22.59 per ounce this week.
Gold and Silver Prices Surge Amid Banking Crisis and Expectations of a Dovish Fed
The price of gold is approaching the $2,000 per ounce mark after numerous U.S. and international banks showed signs of extreme weakness. The Federal Reserve lent banks $164.8 billion in five days, erasing almost 50% of the U.S. central bank’s monetary tightening policy. As a result, the market expects a dovish rate hike this month, possibly around 25 basis points, or even no rate hike at all after the financial calamity the banking industry has faced. According to TD Securities’ global head of commodity strategy Bart Melek, this is “good news for gold,” he told Kitco News.
“Markets are concluding that we’ll see the Fed go for another 25bps increase and then probably sit on it for a while and see what happens,” Melek explained. “The view from the gold perspective is that given disruptions in the banking system and the U.S. Treasury Department’s willingness to help, we might get accommodation that allows inflation to hang around longer at a higher level.”
Gold surged 9.65% against the U.S. dollar this past week, and silver also rose 12.61% higher over the last seven days. Meanwhile, the U.S. Dollar Index (DXY) has fallen from 105.65 at the start of the week to the current level of 103.864. Statistics analyst and market movement forecaster Northstar tweeted about gold’s performance over the years compared to the DXY 21 days ago. “In 1974, the DXY was 105 [and] gold was $150,” Northstar said at the time. “In 1981, DXY was 105 [and] gold was $450. Today, DXY is 105, [and] gold is $1,810. Do not fear a rising U.S. Dollar Index – over time, gold faithfully tracks purchasing power destruction.”
Bloomberg’s senior macro and commodities strategist Mike McGlone referred to gold as a “resting bull” three days ago, on March 15. “Gold appears to be a rare resting bull market compared to most risk assets and commodities that are reverting from getting overextended, on the back of pandemic-related…
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