Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold surged 1.6% to close above $2,023 as ongoing US banking jitters pressured yields and the dollar while boosting demand for safe-haven assets. It was the metal's biggest one-day jump in a month and highest finish in nearly three weeks.

The collapse of First Republic Bank over the weekend has rekindled concerns about the stability of the US banking sector, causing shares of regional banks to plunge and investors to flee into gold and the perceived safety of government bonds.

It is the largest US bank failure since the 2008 financial crisis, driven in part by the rapid escalation of interest rates over the past year, which resulted in insurmountable losses on loans. Myriad smaller lenders are also saddled with balance sheets exposed to bad debt, something that is likely to increase as the economy slows further.

The looming debt-ceiling crisis has the potential to deepen lending issues and the risk of recession if the Treasury is unable to pay its debts and the US credit rating is threatened. Treasury Secretary Janet Yellen warned yesterday that the government could run out of cash by June.

Adding to economic uncertainty, US job openings fell in March to nearly a two-year low, suggesting that the hot labor market is cooling.

Benchmark 10-year Treasury yields fell by the most in six-weeks, pulling back under 3.5% on banking worries and rising expectations that the Fed will pause rates hikes after hiking once more. Falling yields lift gold by decreasing the opportunity cost for holding it instead of bonds.

Fed funds futures see an 84% likelihood of a quarter-point hike this week, according to CME FedWatch, down from 93% yesterday. And traders have boosted their bets on lower rates this year. The odds of rate cuts totaling 75 basis points have risen to 59% today from 28% yesterday.

The dollar also fell on the shifting rate view, dropping 0.2% against major rivals. A weaker dollar often lifts gold and other commodities by making them cheaper in other currencies.

Gold's gains came despite a selloff in oil. US benchmark WTI crude plunged 5.3% to under $73 per barrel, the lowest since late mark, on worries that the US will enter recession this year and demand for oil will fall. Gold often trades in sympathy with oil as a hedge against energy-related inflation, but today its safe-haven attraction won out.

The other precious metals were also mostly higher. Silver rose 1.5% while platinum picked up 1.3% and palladium dropped 1.8%.

At the Comex close: June gold surged $31.10 to $2,023.30; July silver climbed 39 cents to $25.62; July platinum picked up $13.60 to $1,078.30; and June palladium fell by $25.80 to $1,421 an ounce.