Gold prices rise from steep losses, safe haven demand seen easing

© Reuters

By Ambar Warrick

Investing.com -- Gold prices rose in early Asian trade on Tuesday, but were pinned well below recent highs as gains in the stock market and hopes that a U.S. banking crisis had been avoided saw investors pivot away from safe haven assets.

The yellow metal fell sharply on Monday as repeated reassurances of stability in the banking sector helped ease concerns over broader contagion from the collapse of several banks this month.

The takeover of beleaguered lender Silicon Valley Bank by peer First Citizens BancShares (NASDAQ:FCNCA) also laid to rest concerns over economic ructions stemming from SVB’s collapse. This triggered overnight gains on Wall Street, sapping some of the safe haven demand that benefited gold in recent weeks.

Spot gold rose 0.3% to $1,962.80 an ounce, while gold futures expiring in June rose 0.5% to $1,981.20 an ounce by 21:54 ET (01:54 GMT). Both instruments fell nearly 1% on Monday after racing past the $2,000 an ounce level last week.

But gold’s inability to hold the $2,000 level also spurred bets that the yellow metal will see more consolidation in the coming days, especially if risk appetite improves further.

Still, weakness in the dollar offered some relief to gold prices, as markets also bet that the Federal Reserve will lack sufficient economic headroom to keep raising interest rates.

The greenback hovered above its weakest level in nearly two months on Tuesday.

Gold logged steep gains in March as fears of a banking crisis pushed up safe haven demand and saw investors bet on a less hawkish Federal Reserve. While the central bank still signaled continued measures against high inflation, its outlook on future interest rates appeared less certain.

A pause in the Fed’s rate hike cycle is likely to benefit non-yielding assets such as gold and precious metals.

Other precious metals also rose on Tuesday, recovering slightly from a weak start to the week.

Platinum futures rose 0.2%, while silver futures added 0.6%.

Among industrial metals, copper prices trended slightly higher on hopes that an economic crisis had been averted.

Copper futures rose 0.1% to $4.1015 a pound.

Focus this week is on business activity data from major copper importer China to gauge the state of an economic recovery in the country.