Gold futures firmed above $2,000 on Tuesday as fresh banking turmoil renewed investor jitters. Following First Republic’s collapse, other regional banks, including PacWest Bancorp, have seen their stocks plummet. The yellow metal took advantage of the situation with a weaker dollar and more signs of a cooling economy. Can gold touch all-time highs again?
June gold futures surged $33.40, or 1.67%, to $2,025.50 per ounce at 19:16 GMT on Tuesday on the COMEX division of the New York Mercantile Exchange. Gold added to its year-to-date rally of nearly 11%.
Silver, the sister commodity to gold, flirted with $26 again. July silver futures advanced $0.395, or 1.57%, to $25.625 per ounce. The white metal has risen nearly 6% so far this year.
Shares of PacWest had cratered as much as 36%, forcing the New York Stock Exchange to halt trading on intense volatility. In fact, it was halted for volatility multiple times. But other regional institutions tanked, such as Western Alliance, and regional banking exchange-traded funds (ETFs) extended their losses.
Investors have expressed concern about the long-term viability of small- and mid-sized regional banks, especially when new regulations are instituted and more banks fail.
“We believe that banks with assets >$500B and <$60B are the clearest winners in the new world order, while there is likely to be a no-man’s land between $80-120B, as banks in this range may need to shrink to avoid new regulations or more actively engage in M&A to increase scale and absorb regulatory costs,” KBW analyst David Konrad said in a note to clients Sunday.
Indeed, JPMorgan Chase will now control about $2.5 trillion in deposits, accounting for 14% of the nation’s total deposits.
This has many wondering if the Federal Reserve will hit the pause button on its tightening cycle or keep raising interest rates at the May Federal Open Market Committee (FOMC) policy meeting, which finishes on Wednesday.
The US Treasury market was mostly in the red, except for short-term bonds. The two- and three-month bills surged 21 basis points and 4.5 basis points, respectively. The benchmark ten-year yield plummeted 14.3 basis points to 3.431%.
Gold is typically sensitive to movements in interest rates because they can impact the opportunity cost of holding non-yielding bullion.
Meanwhile, on the data front, the labor market continued to show signs of cooling off. Job openings declined to a lower-than-expected 9.59 million in March, down from 9.974 million in February. Job quits tumbled to 3.851 million, down from 3.98 million.
Factory orders rose 0.9% in March, although they declined 0.7% when transportation was removed.
The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, dropped 0.23% to 101.92, from an opening of 102.15. The index is down 1.55% year-to-date.
A weaker buck is good for commodities priced in dollars because it makes it cheaper for foreign investors to purchase.
In other metal markets, June copper futures fell $0.062, or 1.58%, to $3.872 per pound. June platinum futures rose $8.60, or 0.81%, to $1,073.30 an ounce. June palladium futures tumbled $19.30, or 1.33%, to $1,427.50 per ounce.