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(Kitco News) – Gold prices rose Friday to a three-week high of $1,871.90 an ounce, based on Comex April futures at the time of writing. The safe-haven demand was highlighted when Silicon Valley Bank, the 16th largest US bank, collapsed after it experienced a “run” on it by its depositors and investors. While the Federal Deposit Insurance Corporation (FDIC) quickly stepped in to take over the bank’s assets and accounts, SVB’s failure has shaken the general marketplace. That calls into question how aggressive the Federal Reserve can continue to be in tightening its monetary policy to combat problematic price inflation. SVB is reported to be the second largest bank failure in modern US history. Other major U.S. bank stocks also had terrible weeks of trading.
This 40-year-old market observer suspects that the fallout from SBV bank’s bankruptcy may be just in its early stages. Currency and financial markets are spooked and traders and investors are very nervous heading into an uncertain weekend. All of the above are bullish elements for the safe-haven gold and silver markets. Interestingly, the marketplace seems to reject gold and silver as safe-haven assets time and time again – until things in the market get really scary. That’s when the two metals shine.
Gold produced a technically bullish weekly high close on Friday that puts the yellow metal in a much better short-term chart position when trading resumes early next week. The bulls of the gold market at the end of this week have also regained the technical advantage in the short term. This suggests that there will be more buying interest next week from the chart-based traders and investors in the metals.
The US dollar index fell on Friday after the SVB news of failure, while the prices of US government bonds and notes rose sharply (interest rates fell). If the USDX remains under pressure and bond yields continue to fall next week, bulls in the precious metals market will further benefit.
Finally, significant stress and anxiety in the market not only gives the hedged metal bulls power and confidence, it also seriously shakes the confidence of the solid metal market bears, who next week are likely to be much less likely to hold on to any short positions they hold and which now take water.
Disclaimer: The views expressed in this article are those of the author and may not reflect them Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. or the author warrants such accuracy. This article is for informational purposes only. It is not an invitation to exchange commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article does not accept responsibility for any loss and/or damage arising from the use of this publication.