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Gold prices surge as U.S. bank woes taper rate hike expectations

13 March 2023 09:38 (UTC +04:00)

Gold prices hit a one-month high on Monday, recovering sharply from recent losses as markets bet that a burgeoning banking crisis in the U.S. will push the Federal Reserve into softening its hawkish rhetoric in the coming days, APA reports citing Investing.

The dollar fell sharply against a basket of currencies, while an inversion in the yield curve lessened after the failure of Silicon Valley Bank (NASDAQ:SIVB) saw markets reassess their outlook for U.S. interest rates, as U.S. regulators rushed to restore faith in the banking system.

Fed fund futures prices show that a majority of traders now expect a 25 basis point hike by the Fed this month, following initial expectations for a 50 bps hike.

This in turn benefited gold prices with the prospect of less severe interest rate hikes in the coming months. Spot gold jumped 0.6% to $1,878.92 an ounce, while gold futures surged 0.9% to $1,883.25 an ounce by 21:06 ET (02:06 GMT).