Gold and Silver shine on market turmoil after SVB collapse

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Vrasidas Neofytou
Head of Investment Research

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Gold and Silver shine on market turmoil after SVB collapse
Many investors consider gold and silver to be the ultimate safe-haven hedge against economic uncertainties, market turmoil, and volatile trading sessions.

Gold appears to be having a comeback in March since the price has gained over $100 in the last few days to hit a six-week high of $1,915/oz or up 2% during Monday’s session on haven bets following the echo across global markets of the collapse of Silicon Valley Bank and Signature Bank.

Gold, 2-hour chart

Like Gold, the smaller sister Silver also climbed as high as $22/oz, or up 4% yesterday, coming off monthly lows of $20/oz hit early last week.

Investors have turned on the safety of bullion in the aftershock of the SVB’s fallout, along with the fall of the U.S. dollar amid a pullback in hawkish rate expectations by Federal Reserve.

The Federal Open Market Committee (FOMC) gathers on March 21-22 to decide the next monetary policy move in its fight against persistent inflation, and many investors expect that SVB collapse and the banking crisis could cause Federal Reserve to pause or soften interest rate hikes to prevent further economic damage.

Fed Fund futures prices show that a majority of traders now expect a 25-basis point hike by the Fed on the next FOMC meeting following initial expectations for a 50 bps hike.

As a result, the DXY-U.S. dollar index broke below the 104 level for the first time since mid-February, while both 2-y and 10-y bond yields tumbled as low as 3.80% and 3.40% on Monday on prospects for a less hawkish Fed in the coming months, benefiting the dollar-denominated and zero-yield gold and silver.

The impact of the SVB collapse has dramatically affected the banking sector, as investors sharply cut their exposure to regional bank stocks amid fears of contagion from a brewing banking crisis in the U.S. and moved some funds into the safety of bullion.

Silicon Valley Bank was the 16th largest bank in the US, worth more than $200bn, while its collapse is the second-biggest bank collapse in U.S. history.

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