Gold and Silver Shine Amid Banking Woes

APMEX

3/17/2023 1:20:41 PM

Last week, gold was headed for a weekly loss until concerns over SVB and the broader banking sector drove the yellow metal higher. Silver also enjoyed late week safe-haven inflows but would end the week 3.2% lower. Banking woes continued to drive gold higher this week, while investors also braced for the latest round of inflation data.

On Monday, gold jumped by 1.7% on safe-haven inflows, as banking shares tumbled amid fears of a contagion. A dollar dip added to gold and silver tailwinds, as the pair finished the day at $1,911 and $21.78, respectively.

On Tuesday the Fed’s favored inflation gauge, the core consumer price index, showed a 0.5% monthly increase in February, when 0.4% was forecasted. Sentiment following this news, was that the Fed was in an even more difficult position. On one hand the central bank needed to combat inflation with higher interest rates, while balancing concerns that higher rates may also further pressure the economy and banks in the U.S.

Following the inflation news, the dollar and bond yields both rallied, which meant gold and silver ended the day slightly lower, at $1,902 and $21.71. On Wednesday, concerns surfaced that the banking crisis had spread to Europe, as shares from the Swiss-based Credit Suisse bank, plummeted. This was preceded by news that the bank’s largest shareholder, Saudi National Bank, would not provide additional liquidity to Credit Suisse, despite the bank’s struggles. 

Following the news, shares from major U.S. banks such as Bank of America, JPMorgan Chase, and Wells Fargo, all fell. While stocks in the U.S. struggled throughout Wednesday, gold touched its weekly high of $1,936. 

On Thursday, optimism permeated Wall Street amid news that First Republic Bank would receive $30 billion in collective aid from a group of 11 major U.S. banks. Hopes that banking concerns would influence the Fed to soften its rate hike pace at next week’s policy meeting, also contributed to a Thursday uptick for major stock market averages in the U.S. 

Despite rescue efforts, First Republic shares slid by nearly 26% this morning. This news heavily weighed on other banking stocks as well as broader averages. Currently, the Dow Jones Industrial Average is 1.1% lower on the day, while the S&P 500 and Nasdaq Composite are 0.98% and 0.73% lower for the day. 

Gold continued to shine amid banking struggles, surging another 2.3%, to a fresh weekly peak of $1,960 this morning. If gold maintains today’s gains, it would be the yellow metal’s best week since November, with a 4.4% uptick. Currently silver is 2.5% higher for the week, at $22.19 an ounce.