Gold extended gains and copper dropped as the collapse of Silicon Valley Bank soured risk sentiment and curbed expectations for more aggressive rate hikes by the Federal Reserve.
The second-largest collapse of an American lender in history has sparked nervousness about potential spillover effects across the financial system and prompted U.S. officials to move to protect depositors' funds on Sunday. Global stocks slumped on Monday, with copper dropping to a two-month low as it tracked the broader move in risk assets, while gold topped US$1,900 an ounce.
“With two-year yields almost down one per cent in less than a week and the market increasingly pricing away the prospect for a rate hike, gold has to go higher,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “Gold is the most rate- and dollar-sensitive commodity.” “Any escalating financial sector distress would almost certainly see an initial gold selloff to raise liquidity, followed by fresh safe haven buying,” Rhona O'Connell, an analyst at StoneX, wrote in a note. “Its perceived market role likely now to revert to risk-hedging as the headline element.”
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