Gold prices Friday surged to a three-week high of $1,871.90 an ounce, basis April Comex futures, as of this writing. Safe-have demand was featured as Silicon Valley Bank, the 16th largest U.S. bank, collapsed after it experienced a “run” on it by its depositors and investors. While the Federal Deposit Insurance Corporation (FDIC) quickly came in to take over the bank’s assets and accounts, the failure of SVB has badly shaken the general marketplace. It calls into question how aggressive the Federal Reserve can continue to be in tightening its monetary policy to battle problematic price inflation. SVB is reported to be the second-largest bank failure in modern U.S. history. Other major U.S. banks’ stock shares had dreadful weeks of trading, too.
This 40-year market watcher suspects the fallout from the SBV bank failure may be just in its early stages. Currency and financial markets are spooked, and traders and investors are very jittery heading into an uncertain weekend. All of the above are bullish elements for the safe-haven gold and silver markets. Interestingly, it seems the marketplace time and again dismisses gold and silver as safe-haven assets—until things in the marketplace get really scary. Its then when those two metals shine.
Gold produced a technically bullish weekly high close on Friday that puts the yellow metal in a much better near-term chart posture when trading resumes early next week. The gold market bulls late this week have also reclaimed the near-term technical advantage. This suggests there will be keener buying interest next week from the chart-based traders and investors in the metals.
The U.S. dollar index tanked Friday following the SVB failure news, while U.S. Treasury bonds and notes prices rallied sharply (yields dropped). If the USDX continues under pressure and bond yields continue to drop next week, the precious metals market bulls will further benefit.
Finally, significant marketplace stress and anxiety not only gives the safe-haven metals bulls power and confidence, it also seriously shakes the confidence of the staunch metals market bears, who next week will likely be much less apt to hold on to any short positions they are holding and that are now taking on water.
Words by Jim Wyckoff; Source: Kitco
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