The banking crisis is in focus as gold prices fall from $2,000
Gold prices fell on Monday as traders booked profits following a strong run of gains, but they were still close to important levels reached last week as demand for safe haven assets remained steady. Concerns over American and European banks falling one after another caused gold prices to soar to above $2,000 this week, with the yellow metal outperforming the dollar as a safe-haven asset this year. On Monday, there was some profit-taking in the gold market, and the dollar also had a little uptick as some Federal Reserve members said the bank could raise interest rates at least twice more. By 20:42 ET, June-expiring gold futures were down 0.4% to $1,994.76 per ounce, while spot gold was down 0.2% to $1,974.54 per ounce (00:42 GMT). Over the weekend, officials from the United States and Europe issued a warning that the banking industry was being closely watched for any indications of a potential financial meltdown.
Deutsche Bank AG (ETR:DBKGn), whose shares fell last week after the cost of insuring the bank’s debt against probable default shot up too close to five-year highs, was the most recent source of market anxiety. After Swiss lender Credit Suisse Group (NYSE:CS) was acquired by competitor UBS Group AG (NYSE:UBS) in an emergency deal facilitated by authorities, the markets are concerned about the collapse of any European banks. Neel Kashkari, president of the Minneapolis Fed, stated that it is still too early to determine what kind of effects a financial crisis will have on the economy and how it might affect interest rate choices. But, Luis de Guindos, vice president of the European Central Bank, cautioned that weaker growth and inflation are likely to follow a banking crisis. As of now, the ECB has declared it would continue to tighten monetary policy.
Over the past three weeks, gold and other precious metals have increased in value as bets on less policy tightening this year have increased due to fears of a banking catastrophe. The Federal Reserve increased rates last week as was predicted, but it also gave a signal that the peak in interest rates was close at hand. In light of ongoing concerns about a banking crisis, gold is likely to be supported in the coming days. On Monday, other precious metals also gave up recent gains. Platinum futures declined by 0.2%, while silver futures dropped by 0.1%. After experiencing massive swings in previous sessions, copper prices among industrial metals modestly declined as investors evaluated a weaker dollar against worries about a slowing global economy. Futures on copper decreased 0.1% to $4.0762 per pound.
