Gold focus :
The ICDX gold price jumped by 3.52% compared to the previous week, influenced by economic uncertainty due to the US banking crisis that spread to the European region supporting demand for gold as a safe-haven asset.
US financial markets were rocked by the news of the collapse of Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank triggering fears of a new financial crisis in the US amid the Fed's strategy of tightening monetary policy in the last year with an aggressive increase in interest rates. News of the collapse of several US regional banks at once dimmed hawkish expectations on The Fed policy that put pressure on US dollar performance. Also adding to the panic of market participants was the drop in Credit Suisse stocks to over 30% in the aftermath of a material weakness in its reporting and continued with statements from the largest investors disclosing they were unable to provide more loan assistance due to regulatory constraints. The European Central Bank decided to raise interest rates by 50 basis points shortly after Credit Suisse managed to get an emergency loan from the Swiss National Bank for $ 54 billion, adding to the fears of a more severe banking condition. The banking crisis that began to spread to the European region triggered demand for gold considering that gold is considered a safe-haven asset amid economic uncertainty
Report from Bureau of Labor Statistics shows the US Consumer Price Index (CPI) increased 6.0% year-on-year, compared to the previous month's data moving at a 6.4% pace. US Producer Price Index (PPI) corrected 0.1% compared to the previous report which increased 0.3%. The US retail sales report also contracted 0.4% after increasing 3.2% in the previous month's report. From the manufacturing sector, Empire State Manufacturing Index reported getting further away from the indicator level at the level of -24.6, the previous month's data was at the level of -5.8. Philly Fed Manufacturing Index reported at -23.2 compared to the previous report -24.3. A level below 0 indicates contraction in the manufacturing industry. From the employment sector, the US unemployment rate increased to a level of 3.6% from the previous data of 3.4%. US Non-Farm Employment Change also reported at 311K, lower than the previous report of 504K. A series of pessimistic data shows that the US economy is starting to weaken which has fueled expectations of a softening of the US central bank's policy regarding its benchmark interest rate.
Global Banking Conditions and US Federal Reserve Policy
Concerns about the banking and financial industry have also influenced the movement of gold prices so that the update of the turmoil that occurred is still a concern. Authorities seeking to stem the contagion of a widespread banking crisis have seen the Federal Reserve coordinate with other central banks to offer daily currency exchanges to ensure banks in Canada, Britain, Japan, Switzerland and the Euro zone have dollars for operations purposes. Switzerland's largest bank, UBS, agreed to buy Credit Suisse for $3.23 billion and incur losses of up to $5.4 billion in efforts to save the banking crisis and global financial stability.
US central bank monetary policy developments, Federal Open Market Committee (FOMC) meeting which lasted for two days on March 22-23 resulted in a decision to increase interest rates by 25 basis points to be in the range of 4.75% - 5.00%. Fed Chair Jerome Powell indicated the possibility of halting further hikes but added he did not expect a rate cut this year. Policy makers believe that taming inflation may just need one more rate hike this year. The Fed also projects the economic prospects to be slightly more pessimistic with a projected average GDP growth this year of 0.4% compared to expectations issued in December of 0.5%. Growth expectations in 2024 fell to 1.2% from the previous expectation of 1.6%.
Data / Events
USD - Existing Home Sales
USD - FOMC Economic Projections
USD - FOMC Statement
USD - Federal Funds Rate
USD - FOMC Press Conference
USD - Unemployment Claims
USD - New Home Sales
USD - Core Durable Goods Orders m/m
USD - Durable Goods Orders m/m
USD - Flash Manufacturing PMI
USD - Flash Services PMI
Source: ICDX Research