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Gold hits highest level since early February
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Market prices out 50-basis-point Fed rate hike in March
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U.S. CPI data due on Tuesday
(Adds graphics, updates prices)
By Ashitha Shivaprasad
March 13 (Reuters) - Gold raced towards the key $1,900
level on Monday, emboldened by bets that the Federal Reserve may
have to tone down its rate hikes as investors sought cover from
uncertainty triggered by the collapse of U.S. lender Silicon
Valley Bank.
Spot gold was up 1.6% at $1,897.31 per ounce, as
of 1237 GMT, the highest price since early February. U.S. gold
futures gained 1.7% to $1,898.10.
On Friday, gold climbed 2% after California regulators
closed tech startup-focused Silicon Valley Bank .
Regulators also shuttered New York-based Signature Bank on Sunday.
"Recent events show that gold remains a safe-haven asset as
it is able to benefit from market uncertainty. Also, market
participants pricing out rate hike expectations is lifting
gold," UBS analyst Giovanni Staunovo said.
Lower interest rates decrease the opportunity cost of
holding zero-yield gold.
After the SVB collapse, traders now expect the Fed to no
longer raise its benchmark overnight interest rate by 50 basis
points this month, in contrast to a 70% probability before the
crisis. Rate cuts have also now been priced in by the end of
2023. Gold's gain indicates some institutional money came into
the market, but it's not certain that this trend will be seen in
exchange-traded funds (ETFs), said Philip Newman of Metals
Focus.
Gold found further tailwinds from the simultaneous retreat
in the dollar index , which made bullion cheaper for
overseas buyers. Meanwhile, U.S. officials announced a series of measures
to battle the financial fallout from SVB's collapse, but a wider
stock market sell-off continued into European markets. "The near-term path (for gold) remains difficult to predict.
It will be dependent on the upcoming U.S. economic data, such as
the CPI data (on Tuesday)," Staunovo added.
Silver added 4.5% to $21.43 per ounce, platinum was 2.9% higher at $987.20 and palladium climbed
2.4% to $1,411.33.
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Gold technicals Gold versus dollar, yields ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Ashitha Shivaprasad and Arundhati Sarkar in
Bengaluru; editing by Philippa Fletcher, Varun H K and Paul
Simao)
