In the Thursday (March 16) evening trading session, spot gold prices rose by 0.5% to $1926.90 an ounce. Besides that, gold futures edged up by 0.1% to $1933.60 amid the turmoil of the US and European banking crises.
The XAU/USD chart shows a slight movement of gold in the range of $1917.9. Demand for gold is still widely seen as the price position is still stable at a one-and-a-half-month high.
In fact, the market was rocked by the issue of Credit Suisse's bankruptcy following the collapse of the SVB which led to the US banking crisis. Credit Suisse's own problems soon subsided after the Swiss central bank stepped in to support the bank.
Moreover, the ECB seemed to rule out the issue by continuing to raise interest rates by 50 basis points. The euro and Swiss franc got considerable gains, while gold traded at a thin volume.
50 BP Rate Hike Surprised the Market
The ECB surprised the market with a 50 basis point hike of interest rate. The policy is a little troubling because the reason banks are stuck in trouble is because of too fast rate hikes.
That was said by Kitco Metals analyst Jim Wycoff. The analysts are watching gold demand as a safe haven continue amid rising anxiety in the market as the banking crisis.
Next, investors will focus on the Fed's monetary policy. The United States central bank is expected to raise interest rates by as much as 25 basis points.
That was although rising interest rates are likely to depress gold's gains, the short-term outlook for this commodity prices remains bullish as long as the rate hike is in line with expectations.
Further the Fed’s Policy May Affect Gold
However, according to senior analyst Daniel Pavilonis of RJO Futures, gold prices could come under pressure. It is especially if the Fed raises interest rates by as much as 50 basis points.
For the long term, the outlook for this precious metal is still under uncertainty despite the chance of reaching $2000 again. JPMorgan's team of analysts said something about this situation.
They said that gold's long-term strong average performance ahead of a slowdown in the pace of Fed rate hikes and the United States recession disagreed amid macro uncertainty.
Elsewhere, The US dollar index or DXY declined again towards the threshold of 104.00 in Friday's trading (17/March). That was as market panic related to the global banking crisis receded.
Commitments Made by the Fed, SNB, and ECB
Major currency pairs were observed to strengthen rapidly, especially AUD/USD, NZD/USD, and EUR/USD. The America’s Federal Reserve, European Central Bank (ECB), and Swiss National Bank (SNB) separately conveyed commitments.
These are the commitments to maintain banking stability through the provision of additional liquidity and other policies where necessary. Their announcements contribute to maintaining the confidence of market participants.
Some banks indicated to be in trouble in the United States and Europe also received timely assistance. That is why; the systemic impacts are avoided for now.
The Federal Deposit Insurance Corporation (FDIC) has taken over Silicon Valley Bank and Signature Bank. Eleven banks even gave USD30 billion in funds to "rescue" First Republic Bank in US.
Credit Suisse will Borrow Funds from SNB
Meanwhile, Credit Suisse stated that it would borrow funds of up to around USD54 billion from SNB to strengthen its credibility. The news restored market confidence that had subsided due to the Silicon Valley Bank and Credit Suisse crisis in recent days.
Sentiment has also improved following the ECB's decision to keep raising its interest rate by 50 basis points yesterday. EUR/USD strengthened to the range of 1.0665 in today's trading. The euro responded positively to the ECB's interest rate decision yesterday.
That was although some market participants chose to "wait-and-see" ahead of the release of Eurozone inflation data today. The Eurozone banking sector remains in a fairly solid state. It was said by Nick Bennenbroek, an international economist at Wells Fargo.
