At the start of the week, an ounce of 0.999 fine gold was trading at $1,813 per unit. Seven days later, gold is up 9.65% against the US dollar to the current spot price of $1,988 an ounce. Gold’s surge comes at a time when confidence in the global banking system is at an all-time low and five major banks have received bailouts. The value of an ounce of fine silver also rose more than 12% from $20.01 to $22.59 an ounce this week.
Gold and silver prices rise amid banking crisis and dovish Fed expectations
Gold prices are approaching $2,000 an ounce after numerous US and international banks showed signs of extreme weakness. The Federal Reserve lent banks $164.8 billion in five days, erasing nearly 50% of the Federal Reserve’s monetary tightening policy. As a result, the market is expecting a dovish rate hike this month, possibly by 25 basis points, or no rate hike at all following the financial disaster the banking industry has faced. According to Bart Melek, global head of commodity strategy at TD Securities, this is “good news for gold,” he told Kitco News.
“Markets are concluding that the Fed will target another 25 basis point hike and then will likely sit on it for a while and see what happens,” Melek explained. “From gold’s perspective, the view is that given the disruptions in the banking system and the US Treasury’s willingness to help, we may get an adjustment that will allow inflation to remain at higher levels for longer.”
Gold is up 9.65% against the US dollar over the past week and silver is also up 12.61% over the past seven days. Meanwhile, the US Dollar Index (DXY) has fallen to 103.864 to date from 105.65 at the start of the week. Statistical Analyst and Market Movement Forecaster north star tweeted about gold’s performance over the years versus the DXY 21 days ago. “In 1974 the DXY was 105 [and] Gold was $150,” Northstar called at that time. “In 1981, DXY was 105 [and] Gold cost $450. Today is DXY 105, [and] Gold costs $1,810. Don’t be afraid of a rising US Dollar Index – over time, gold faithfully tracks purchasing power destruction.”
Bloomberg’s chief macro and commodities strategist Mike McGlone described gold as a “dormant bull market” three days ago, March 15. the back of the pandemic-related excess liquidity,” McGlone said in one Investor Notice. “Crude’s plunge could be part of the deflationary spark for the metal to break the $2,000 an ounce resistance. If history is any guide, 300 fast-falling commodities, a banking crisis and Federal Reserve tightening represent an oxymoron and could trigger a Fed pivot that boosts gold,” McGlone added.
Silver could post much bigger gains than gold; Bitcoin is poised to trade like gold and US Treasuries
Richard Mills, owner of aheadoftheherd.com, said on Friday that he thinks silver’s rise is an understatement. “Current indications are that silver is grossly undervalued,” Mills said. “Right now, on the morning of March 17, the gold-to-silver ratio is 88:1, which means it takes 88 ounces of silver to buy one ounce of gold.” Mills added that when gold was $2,000 per ounce, “Silver rose to nearly $30 per ounce, up 147%”. The investor said the silver-to-gold ratio just fell from over 100:1 to just over 64:1, and he said a significant rise in silver values ”could easily happen again.”
Many gold and silver advocates have high hopes for the future of precious metals. Additionally, while McGlone believes gold will be affected by the current macroeconomic events, the market strategist believes that the banking troubles could be a defining moment for Bitcoin (BTC). “Bitcoin may trade more like long US Treasuries and gold as banks come under pressure from bond price collapse. Bitcoin holding above $25,000 is a clear sign of divergent strength,” McGlone said tweeted.
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Asset Allocation, Banking Crisis, Bart Melek, Bitcoin, Commodities, Commodity Prices, Cryptocurrency, Diversification, Federal Reserve, Financial Markets, World Economy, Gold, Inflation, Investing, Investors, Market Analysis, Market Disruption, Market Forecast, Market Outlook, Market Performance, Market Forecasts, Market Risks, Market Strategy, Market Trends , Market Uncertainty, Market Volatility, Mike McGlone, Northstar, Northstar Charts, Pandemic, Portfolio Management, Precious Metals, Richard Mills, Risk Assets, Silver, Trading Strategies, US Dollar Index, US Treasuries, Wealth Protection
What are your thoughts on 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 this just a temporary freak? Let us know in the comment section below.
Jamie Redman is the news director at Bitcoin.com News and a Florida-based financial technology journalist. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for bitcoin, open source code and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about today’s emerging disruptive protocols.
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