Gold retreats from five-week high as investors seek banking sector clarity

Bengaluru — Gold retreated on Thursday from a safe-haven-driven rally, which sent prices to their highest since early February, as traders sought more clarity on the financial sector after Credit Suisse became the latest focal point for fears of a banking crisis.

Spot gold was down 0.3% at $1,912.48 per ounce at 3.28am GMT after rising more than 1% on Wednesday. US gold futures shed 0.8% to $1,915.10.

“Investors are looking for a safe asset to park their money in after the US banking sector crisis. This has triggered fresh rallies in a gold-like safe haven,” said Hareesh V, head of commodity research at Geojit Financial Services.

“Today’s fall is attributed to a technical correction from an [over] five-week high and a steady dollar. Investors are keenly waiting for fresh cues on the US banking crisis.”

Shares of Credit Suisse slumped by as much as 30% on Wednesday after the lender’s largest shareholder said it could not provide further support, just days after the collapse of US banks Silicon Valley Bank (SVB) and Signature Bank.

Swiss regulators pledged a liquidity lifeline to Credit Suisse in an unprecedented move by a central bank.

Safe-haven currencies such as the US dollar were in demand on Thursday. Gold competes with the dollar as a safe store of value, and gains in the currency make bullion less attractive for overseas buyers.

Markets are now pricing in a 65% chance for a 25-basis-point (bps) hike at the US Federal Reserve’s March meeting.

Bullion is considered a hedge against economic uncertainties, though higher rates increase the opportunity cost of holding the non-yielding asset.

“Longer-term, gold’s strong average performance in the lead-up to and following both initial Fed rate cuts and US recessions keeps us biased for higher prices as macro uncertainty swirls,” analysts at JPMorgan said in a note, adding that they expect gold to top $2,000 per ounce this year.

Spot silver slipped 0.4% to $21.71 per ounce, platinum was 0.3% lower at $959.52, while palladium gained 1.3% at $1,465.91.