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Gold prices poised to end the week strong

March 17, 2023

NEW YORK (March 17) Gold prices have remained flat in early Asian trade on Friday, and are set to log their strongest week in two months, as investors continue to seek safe haven assets amid fears of a potential banking crisis.

Gold prices have also benefited from doubts over the Federal Reserve’s ability to raise interest rates amidst growing economic pressure.

The collapse of several regional U.S. banks has raised concerns over contagion in the broader economy, driving investors towards safe havens and resulting in a boost to gold prices. While government intervention and the bailout of other stressed lenders have helped to quell fears of contagion, the markets remain on edge over a potential banking crisis.

As a result, traders have reduced their expectations of further interest rate hikes by the Federal Reserve ahead of their meeting next week, with markets pricing in a nearly 90% chance of a 25 basis point hike, down from prior expectations for a 50 basis point hike.

The dollar has also been affected by these concerns, which in turn have benefited metal markets. However, the greenback has recovered some of its losses this week due to some safe-haven demand, as well as stronger-than-expected U.S. inflation data for February.

The rise in inflation puts additional pressure on the Federal Reserve to increase interest rates. Attention is now focused on their upcoming meeting, which is expected to provide further guidance on monetary policy.

Although higher interest rates can push up the opportunity cost of holding non-yielding assets, such as gold, metal markets have seen a boost this week due to investors’ increased appetite for safe-haven assets amidst concerns over a potential banking crisis.

Spot gold XAUUSD rose slightly to $1,920.12 an ounce, while gold futures rose 0.1% to $1,923.95 an ounce by 00:30 GMT.


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