Gold Cracks $US2k on Safe-Haven Buying
PUBLISHED
2023-03-24
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Gold has elbowed its way above $US2,000 an ounce for the first time since August 2020 as investors oddly sought safe haven protection in the wake of the Fed’s decision to lift its key interest rate by 0.25%.
Demand for gold was given a boost when the Bank of England added its own 0.25% rise early in Thursday’s session.
The reason why the surge was odd is that there was no triggering factor apart from the decisions by the Fed and Bank of England and those rate rises were the minimum possible and made with regard to the global liquidity problems.
Comex gold for June delivery closed up $US46.79 to settle at US$2,013.30 an ounce, the highest close since August 10, 2020. The Comex front month jumped more than $US46 to settle at $US1,993 an ounce and touched a day’s high of $US2,006.10 an ounce.
Helping sentiment was an upgrade by Goldman Sachs in its gold price forecast.
It lifted its 12-month gold price target to $US2,050 an ounce from $US1,950, joining others such as Citi, ANZ and Commerzbank in raising forecasts.
The surge will see prices of ASX listed gold miners jump today (Friday) for a strong end to the week.
The S&P 500 closed 0.29% higher, while the Nasdaq climbed 1%. The Dow rose 73.66 points, or 0.23%, after climbing up as much as 481.38 points.
The S&P 500 and the Nasdaq were up as much as 1.8% and 2.5%, respectively, before weakening late in the session.
Worries over the health of the banking sector is also spurring safe-haven buying in gold after Treasury Secretary Janet Yellen said there may not be an automatic rescue for all depositors should additional banks fail following the collapse of Silicon Valley Bank and Signature Bank this month.
If Ms Yellen’s comments were the trigger, then that’s an overkill by investors because all she did was restate government policy.
Silly analysts and economists still have it in their mind that the Fed will be cutting rates this year because the economy will weaken to a near recession.
"The Fed's 25bps rate hike came in-line with market expectations, but the push back on market expectations of about 100bps of rate cuts for this year failed to materialize, and together with a softer dollar and Yellen's message that the government is unlikely to unilaterally expand deposit insurance, they added fresh upside momentum to gold," Saxo Bank noted
The US dollar was steady, with the ICE dollar index last seen unchanged at 102.35. The Aussie dollar continued to trade under 67 US cents (around 66.87 US cents).
Bond yields edged down, with the US 10-year note last seen paying 3.39%, down 8 basis points.
The yield on the US two-year bond eased to 3.80%, a loss of 13 points (It’s said to track the Fed’s policy decisions more closely than the yield on 10 year bonds).
And ASX investors won’t like the news from iron ore markets today.
Australian iron ore miners will struggle after the SGX price dropped under $US120 a tonne to close at $118.05 on Thursday.
That’s down $US12 a tonne since last Friday.
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Last week we pointed out that Apple shares had emerged as a sort of ‘safe haven’ in 2023 amid the instability, especially in the past few weeks.
Well, Apple shares have gone on rising in the past five trading sessions, hitting $US161.55 during trading on Thursday - its highest level in six months, since mid-September.
The shares settled back to end at $US158.93, leaving it up more than 27% since the start of the year and well ahead of the 2.8% rise in the S&P 500.
Apple’s market value has now climbed back over $US2.5 trillion
That’s more than 21% above No. 2 Microsoft ($US2.06 trillion).
While the financial sector has suffered in March, Apple is almost 8% higher in March and its year-to-date gain is more than Alphabet (19%), Amazon (16%) or Microsoft (15%).
Warren Buffett’s Berkshire Hathaway is the second-largest holder in Apple with a 5.66% stake, ahead of Blackrock and behind only Vanguard.
Berkshire shares fell more than 3% on Thursday because of its big investment in financials like Bank of America, Ally Financial and Amex and energy stocks like Chevron and Occidental Petroleum.
The strength in Apple shares means there will be a lot more riding on the company’s March quarter (its second for its 2022-23 financial year) report when it is released in early May.