Gold News

Gold Bullion 'Loses Bank-Crash Bid' Ahead of the Fed, China-Russia 'Change the World'

GOLD BULLION dipped to 1-week lows for UK and Euro investors on Wednesday but held firm against a weaker US Dollar ahead of the Federal Reserve's March interest-rate announcement – a decision now deeply complicated by the crash of Silicon Valley Bank and 2 other US lenders.
Trading around 3-session lows above $1940 per ounce in London, gold bullion briefly slipped beneath €1800 and £1580 before rallying a little as the China-Russia meeting between presidents Xi and Putin in Moscow ended with warm words on their friendship but no new proposals on Beijing's "peace plan" for Ukraine.
Betting that the US central bank will end 2023 with its key interest rate at or above today's level of 4.75% has leapt back towards 1-in-2, surging from last Wednesday's odds of 1-in-100 but still less than 1/2 the dead-sure 100% certainty seen this time last month.
Inflation in world No.6 economy the UK failed to slow as expected last month, new data said Wednesday, running well above 10% and raising expectations for a Bank of England rate rise at its meeting tomorrow.
But despite US inflation remaining at what would be 4-decade highs outside of last summer's peaks, the path for Fed rates ahead now continues to point lower according to market forecasts gathered by the Atlanta Fed.
Expected future path of the 3-month average Fed Funds rate. Source: Atlanta Fed
"Gold has eased lower as safe-haven demand dissipates," Reuters quotes Singapore bank OCBC's forex strategist Christopher Wong.
"It does appear that banking sector wounds are showing tentative signs of recovery after the emergency backstops and assurances from authorities."
Following last week's failure and government-agency resolution of SVB, the assets and deposits at failed crypto-sector specialist Signature Bank (Nasdaq: SBNY) are being bought by a subsidiary of New York Community Bancorp (NYSE: NYCB), while regional bank First Republic (NYSE: FRC) – whose balancesheet resembles the failed Silicon Valley Bank in holding many loss-making mortgage bonds and other investments against a heavy burden of large, uninsured deposits – has hired investment bank Lazard to join US giant J.P.Morgan in helping it "explore strategic options."
Shares in FRC today edged 1.2% higher after sinking by 7/8ths so far this month.
A "significant percentage" of AT1 bondholders in Credit Suisse – now wiped out in the crashed bank's government-driven takeover by rival Swiss lender UBS – are meanwhile looking at legal action, claims a US law firm, seeking redress on their $17bn loans.
The US banking failures of recent weeks are "very different" from what happened in 2008 according to US Treasury Secretary Janet Yellen, but she stands ready to back-stop the savings of all bank depositors if panic spreads, she told lawmakers Tuesday.
Longer-term rates in the bond market today extended their rebound from last week's sudden 6-month lows, while so-called real yields – meaning the rate offered to buyers of 10-year inflation-protected Treasury bons – held little changed around 1.33% per annum, higher by almost 2 whole percentage points higher from this time last year.
While gold bullion prices and real 10-year US rates typically show a strongly inverse relationship, gold priced in Dollars was trading unchanged from late-March 2022 ahead of Wednesday's US Fed decision.
Twelve months into defending itself against Russia's invasion, embattled Ukraine is set to receive €2 billion of ammunition from the European Union and will become the first at-war nation to receive a loan from the International Monetary Fund, news reports said today.
China's 12-point 'peace plan', released last month, calls for a ceasefire and talks, plus an end to "abusing unilateral sanctions" (ie, those aimed at Russia by the US and Europe) while stressing that national sovereignty should be upheld but condemning a "Cold War mentality" that seeks to achieve security "by strengthening or expanding military blocs."
"Russia-China relations have reached the highest level in their history and are gaining even more strength," writes Putin in a column for today's China Daily, reciprocated with a more subdued piece from Xi in Rossiyskaya Gazeta.
"Changes are coming that have not happened for 100 years," said China's President Xi to President Putin as he was leaving Moscow overnight, "and we are promoting these changes together.
"Where we are united, now there is peace."

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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