The collapse of Silicon Valley Bank startled investors, sending their prices of gold and silver soaring on Monday. The crisis also raised hopes that the U.S. Federal Reserve would have to curtail its expansionary monetary policies.
Despite efforts by regulators to contain the turbulence at Silicon Valley Bank and Signature Bank, the U.S. dollar and Treasury yields continued to slide.
Several experts agree that, with assistance from brief covering of long exposures, gold appears to be fulfilling its role as a safe haven.
The price of spot gold yesterday increased by 2.44% to $1,921.63/ounce, the highest level since early February. US gold futures increased by 2.6% to close at $1,916.50.
Other precious metals followed suit, with palladium rising 6.92% to $1,474.2458, platinum rising 4.03% to $997.8473, and silver rising 6.16% to $21.7741 per ounce.
Since interest rates are currently very low and the U.S. dollar is depreciating, many investors are turning to the precious metals market as a safe haven from this volatility and danger.
Investors no longer anticipate a rate increase of 50 basis points by the Federal Reserve next week; instead, they now anticipate a move of 25 basis points, with some even anticipating no increase at all. This makes gold more alluring as it pays no interest.
Some people think that whether the Fed’s actions are successful will have a significant impact on the future of gold prices. Gold may give up some of its recent gains if the bankruptcy of the Silicon Valley Bank (SVB) is seen as an isolated episode.
Gold will probably continue to be in demand if the crisis causes the Fed’s policy to change permanently.
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