London March 20 2023: Gold rose above $2,000 an ounce for the first time in more than a year after banking crises in the US and Europe triggered a return to haven buying.
Bullion surged 6.5% last week in its biggest advance since the early days of the pandemic in March 2020 amid growing fears over Credit Suisse Group AG and as several regional American lenders collapsed.
It gave up some of those gains early on Monday in the wake of an announcement that UBS Group AG had agreed to buy the Swiss lender in an emergency, government-brokered deal, but then started rising again later in the session.
Heading into this latest banking crisis, precious metals were dramatically under-owned after a big selloff in February, said Ole Sloth Hansen, head commodities strategy at Saxo Bank A/S. The focus is now on the banking sector response to the Credit Suisse bailout as well as the Federal Reserve rate-setting meeting on Wednesday, “where the outcome is going to be the most difficult to predict in years,” he said.
Spot gold rose 0.8% to $2,004.18 an ounce as of 7:56 a.m. in London. The last time bullion traded above the $2,000 mark was on March 10, 2022. The Bloomberg Dollar Spot Index was steady after falling 0.6% last week. A stronger dollar is negative for commodities like bullion that are priced in the US currency.
Whether gold can hold onto these gains will really depend on the dollar, Commonwealth Bank of Australia analyst Vivek Dhar said in a note. “We consider the US dollar a stronger safe-haven asset than gold. That means that if risk events are large enough we will typically see markets shift from gold to the US dollar.”
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