Gold prices did not help alleviate the banking crisis

Gold prices fell on Thursday as the US dollar strengthened. This eased worries about the global banking system and slowed the flow of safe-haven gold.

Spot gold decreased by 0.2% at $1,960.68 per ounce as of 0103 GMT. At the same time, US gold futures declined by 0.3% to $1,962.10.

Consequences of the decline in gold prices

The dollar index increased by 0.1%, making gold less accessible to buyers using other currencies.

Market participants are awaiting data on US personal consumption spending. It is the Federal Reserve’s preferred measure of inflation for further guidance on Fed monetary policy changes. The data will become public on Friday.

On Wednesday, Fed Vice Chairman Micheal Barr said that the Fed would conclude its interest rate on a meeting-to-meeting basis, factoring financial conditions and other factors into that assessment.

Barr said the blame for the collapse of the Silicon Valley Bank rested upon bank executives, Fed overseers, and other regulators.

The market sees a 41.2% chance that the fed will hike its interest rate by 25 basis points in May. According to the CME FedWatch tool, the opportunity cost of owning unprofitable gold increases when interest rates are raised to lower inflation.

European shares rise as falling energy prices impact inflation

According to what Catherine Mann, a member of the BoE monetary policy committee, said on Wednesday, falling energy prices would decrease headline inflation concerning the Bank of England’s 2% target. Still, constant underlying inflation will make it difficult for the Bank of England to entrench the monetary policy as the year progresses.

Spot silver declined by 0.3% to $23.29 an ounce. Meanwhile, platinum fell by 0.5% to $962.88. Moreover, palladium fell 0.2% to $1,436.85.

European shares increased, matching an upbeat mood in the Asian market.

Higher interest rates weaken the attractiveness of zero-interest gold.

“The fed must choose between higher inflation, a harder landing, or financial instability – whatever outcome will provide a haven in the play” will likely see gold retest and hit an all-time high ($2,070 per oz) this year, metal company MKS PAMP said in a note.

Politicians say the European Central Bank interest rate will likely need to rise further to curb inflation.

“Our outlook for gold for the second half of 2023 remains positive but not outrageous as inflation persists, and the Fed continues to look to hike rates until things go wrong,” Norman said.