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Gold price hits record highs against Aussie dollar as banking crisis drives safe-haven demand - Surbiton Associates

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(Kitco News) - Growing tensions in global financial markets are creating solid demand for gold worldwide, with Australia seeing record prices for the yellow metal.

Overnight, spot gold against the Aussie dollar reached a session high of A$2,922.36 an ounce. While prices have dropped from their all-time highs, they remain elevated, trading around $2,885 an ounce.

In a note published late Wednesday, Dr. Sandra Close, a director of Surbiton Associates, an Australian-based mining consultancy firm, said that it is not surprising investors are jumping into gold as a safe-haven asset as turmoil in the global banking sector roils financial markets worldwide.

"Gold is the ultimate safe haven, it is no-one's liability," said Close. "If you own gold, it is not a piece of paper, not bank note and not a promise to pay the bearer – it is all yours. Also, it is virtually indestructible, easily transportable and recognized all over the world."

The all-time high Aussie gold price comes as gold has surged in the last few days past $1,900 an ounce against the greenback. While off its highs, April gold futures last traded at $1,921.50 an ounce, up 4% so far this year.

Meanwhile, gold prices against the Aussie dollar are up more than 8% so far this year.

The price of gold can have a significant impact on Australia's economy as it is the world's second-largest gold-producing nation, just behind China.

Close noted that strong gold prices in Australian dollars is a significant factor that has continued to drive production.

"Gold production for the 2022 calendar year totaled around 313 tonnes, or a little over 10 million ounces and just half a percent or two tonnes less than in 2021," Close said. "The value of gold produced in 2022 was around A$26 billion and as most of this gold is exported, the gold mining industry is an important contributor to Australia's total foreign exchange earnings."

Gold has seen significant safe-haven demand this week as investors digest the news that government regulators took over California-based Silicon Valley and New York's Signature Bank.

Sunday, the U.S. government worked to contain its biggest banking crisis since the 2008 Great Financial Crisis, announcing that all deposits at the two banks would be guaranteed.

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The U.S. banking crisis turned global when one of Europe's largest banks, Credit Suisse, saw its share price drop more than 30% Wednesday, a day after it said in its annual report that it lost roughly $8 billion last year.

While it's not an all-time high, gold against the euro hit its highest level in nearly a year Wednesday, topping out at €1,837.93 an ounce. Year-to-date, gold prices are up more than 6% against the euro.

Tensions surrounding Credit Suisse have eased after the Swiss National Bank offered the bank a lifeline of up to 50 billion Swiss francs ($54 billion).

Although fears in the banking sector have waned Thursday, analysts note that the threat of a bigger crisis remains. Banks continue to face the underlying issue of significant bond market losses as central banks, around the world, aggressively raise interest rates.

Some analysts have said that gold's performance in major global currencies is one reason why they expect gold will hit all-time highs against the U.S. dollar this year.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.