14/04/2023 – This Week in Gold
Retail and institutional investor interest in gold has spiked recently as the gold price hit its highest level of the year on Thursday, driven by bets that inflation will remain sticky despite recent declines. The price of gold reached $2,040 a troy ounce, up 12% year to date. That also put it within striking distance of its record high, reached in the summer of 2020. That meant that on Thursday the price of gold was only a 1% move away from its record peak. There was a pullback on Friday afternoon as the price slid back down to $2,000, a key physiological support level for the yellow metal. The bulls shall be hoping gold can close on the week above this key support level.
Silver also performed very well this week as it opened the trading week at $24.98. After a moving little on Tuesday, silver began a steady rise from Wednesday onwards. Silver broke through the $26 barrier on Friday, reaching a week high of $26.05, which marked an increase of more than 4% from the week’s open. Much of the week’s gains were lost on Friday afternoon, retreating to $25.24 at the time of writing. Despite this pull back, silver finished the week up just more than 1%.
The Banks, Inflation & Interest Rates
Financial markets were spooked recently following the news that over the course of five days in March, three small- to mid-size U.S. banks failed. SVB, Signature and Credit Suisse are the latest examples of poor risk management and weak financial reporting in the financial system. These major red flags in the banking sector recently have undoubtedly sparked a huge interest and demand for haven assets such as gold and these banking fears continue to be a catalyst for the price of gold trending higher. According to a recent Bloomberg article, deposits at JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. are expected to have tumbled $521 billion from a year earlier, the biggest drop in a decade. The risk of a bank run is obviously on the mind of many investors and the markets shall be closing monitoring the latest earning reports of the major US banks as their results are due to be released later in the week.
We learned earlier in the week that inflation cooled slightly to 5% in March but consumers can still expect to continue to feel the pinch for a while longer as inflation proves to be sticky. The latest inflation reading represents the ninth-straight month of easing price growth on an annual basis, and is down from a 9% high last June. But it is still well above the Federal Reserve’s 2% target. These inflation numbers are closely tied to the Federal Reserve’s decisions about how high interest rates should be, a majority of investors are betting the Fed will raise rates by 0.25% again at its next meeting May 3.
Several analysts are projecting record highs for the precious metal in 2023. So, whether you are a novice investor looking to get started investing in precious metals are you are an experienced investor looking to add to their position, our dealing desk in Dublin can be contacted on 01-254-7901 and we would be glad to help.