At the start of the week, a troy ounce of .999 fine gold was trading at $1,813 per unit. Seven days later, gold rose 9.65% against the US dollar to the current spot price of $1,988 an ounce. Gold’s rise comes at a time when confidence in the global banking system is at an all time low and five major banks have received bailouts. An ounce of fine silver also rose in value, rising more than 12% from $20.01 to $22.59 per ounce this week.
Gold and silver prices rise amid banking crisis and expectations of a dovish Federal Reserve
He gold price is nearing the $2,000 an ounce mark after numerous US and international banks showed signs of extreme weakness. The Federal Reserve lent to banks $164.8 billion in five days, erasing almost 50% of the US central bank’s monetary tightening policy. As a result, the market expects a moderate rate hike this month, possibly around 25 basis points, or even no rate hike at all after the financial calamity the banking industry has faced. According to Bart Melek, global head of commodity strategy at TD Securities, this is “good news for gold,” he said. said Kitco News.
“Markets are concluding that we will see the Fed go for another 25bp hike and then probably wait a while and see what happens,” Melek explained. “The outlook from the gold perspective is that given the disruptions in the banking system and the US Treasury Department’s willingness to help, we could get a tightening that allows inflation to stay longer at a higher level.” high”.
Gold It rose 9.65% against the US dollar last week, and silver is also up 12.61% over the past seven days. Meanwhile, the US Dollar Index (DXY) it has fallen from 105.65 at the beginning of the week to the current level of 103.864. Statistics analyst and forecaster of market movements North Star tweeted about gold’s performance over the years compared to the DXY 21 days ago. “In 1974, DXY was 105 (and) gold was $150”, Northstar saying At the time. “In 1981, DXY was 105 (and) gold was $450. Today, DXY is 105, (and) gold is $1,810. Have no fear of a rise in the US dollar index – over time, gold faithfully tracks the destruction of purchasing power.”
Bloomberg senior macro and commodity strategist Mike McGlone referred to gold as a “resting bull” three days ago on March 15. the back of pandemic-related excess liquidity,” McGlone said in a investor note. “The fall in crude oil may be part of the deflationary spark for the metal to break the resistance at $2,000 an ounce. If history is any guide, a rapidly declining 300 commodity, a banking crisis and a tightening of the Federal Reserve pose an oxymoron and could trigger a Fed pivot that boosts gold,” McGlone added.
Silver could post much larger gains than gold; Bitcoin ready to trade like gold and long US Treasuries.
Richard Mills, owner of beforeoftheherd.com, explained Friday that he believes silver rise is undervalued “Current indicators show that silver is seriously undervalued,” Mills saying. “Right now, on the morning of March 17, the gold-silver ratio is 88:1, which means it takes 88 ounces of silver to buy one ounce of gold.” Mills added that when gold reached $2,000 an ounce, “silver went up to almost $30 an ounce, an increase of 147%.” The investor said that the silver-gold ratio fell from more than 100:1 to just over 64:1, and opined that a significant rise in the value of silver “could easily happen again.”
Many gold and silver advocates have high hopes for the future of precious metals. Furthermore, while McGlone believes that gold will be affected by current macroeconomic events, the market strategist also believes that the banking problems may be a defining moment for bitcoin (BTC). “Bitcoin may be progressing to trade more like long-term US Treasuries and gold as banks come under pressure due to collapsing bond prices. Bitcoin holding above $25,000 is a clear sign of divergent strength,” McGlone tweeted.
What do you think about the current state of the global banking system and its potential impact on the value of gold, silver and other assets like bitcoin? Do you think we are headed for a major financial crisis, or is it just a temporary problem? Let us know in the comments section.
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