At the beginning of the week, 0.999 fine gold per troy ounce was trading at $1,813 per piece. Seven days later, gold rose 9.65% against the U.S. dollar to its 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 are undergoing bailouts; an ounce of pure silver has also gained in value, rising more than 12% this week from $20.01 to $22.59 per ounce.
Gold and silver prices soared
on the banking crisis and expectations of a dovish Fed.
Goldprices are approaching the $2,000/oz mark after numerous US and international banks showed signs of extreme weakness. The Federal Reserve has lent banks$164.8 billionin five days, wiping out nearly 50% of the U.S. central bank’s tight monetary policy. As a result, the market is expecting a dovish rate hike this month, perhaps around 25bp, or no rate hike at all after the financial disaster the banking industry has faced, according to Bart Melek, global head of commodity strategy at TD Securities, which is “good news for gold,” he told, tellingKitco News
“The market is concluding that the Fed will raise rates another 25 bps and then wait and see for a while,” Melek explains.” From a gold perspective, given the turmoil in the banking system and the willingness of the U.S. Treasury to help, we think we may get the kind of easing that will keep inflation at a higher level for longer.”
Over the past week, goldhas surged 9.65% against the US dollar, and silver has gained 12.61% over the past seven days. Meanwhile,the U.S. dollar index (DXY)has fallen from 105.65 at the beginning of the week to its current level of 103.864. Statistical analyst and market movement forecaster, Northstartweeted 21 days ago about gold’s performance over the years compared to the DXY.” In 1974, DXY was 105 (and) gold was $150,” Northstarsaid then.” In 1981, DXY was 105 [and] gold was $450. Today, the DXY is 105, [and] gold is $1,810. Don’t be afraid of the rising US dollar index – gold will faithfully track the destruction of purchasing power for a long time.”
Bloomberg Senior Macro & Commodities Strategist Mike McGlone referred to gold as a “resting bull” three days ago on March 15. In an investor note, McGlone statedthat “gold appears to be a rare resting bull market compared to risk assets and commodities, which have been oversold on the back of pandemic-related excess liquidity.” ‘The plunge in oil may be part of a deflationary firestorm that could help metals break through resistance at $2,000 an ounce.’ If history is a guide, 300 plunging commodities, a banking crisis, and Federal Reserve tightening could lead to contradictions and trigger Fed pivoting.