Gold prices keep $2,000 in sight as bank fears bring bumper quarter

© Reuters.

By Ambar Warrick

Investing.com -- Gold prices were flat on Friday, staying within sight of the key $2,000 level after wild swings this week, although safe haven demand in the wake of a potential banking crisis put the yellow metal on course for a sharp rise this quarter.

Bullion prices flirted with the $2,000 level for most of this week, before staging a rally on Thursday after higher-than-expected U.S. jobless claims pointed to further cooling in the jobs market, which in turn could spur a drop in inflation.

This limits the economic headroom afforded to the Federal Reserve in raising interest rates, which in turn bodes well for non-yielding assets such as gold.

Spot gold rose 0.1% to $1,981.59 an ounce, while gold futures rose 0.1% to $1,998.95 an ounce by 21:53 ET (01:53 GMT). Both instruments were set to rise about 9% in the first quarter of 2023.

Gold prices shot up through March as fears of a banking crisis saw investors pile into traditional safe haven assets, chiefly the yellow metal.

While government intervention now appears to have stemmed the possibility of a bigger lending crisis, the collapse of several U.S. banks saw investors begin pricing in a less hawkish Fed, on bets that the central bank will try to avoid more pressure on the economy.

Thursday’s unemployment claims data also factored into this trend, given that the central bank said it was also targeting some cooling in the employment space. Metal markets rallied on Thursday, and were largely muted on Friday.

Platinum futures rose 0.4% to around $1,000 an ounce, while silver futures were flat near $24 an ounce. Smaller increases in U.S. interest rates point to a lower opportunity cost for holding non-yielding assets.

The dollar slid on Thursday and was muted in Asian trade, which further supported non-yielding assets. U.S. Treasury yields also retreated.

Among industrial metals, copper prices fell on Friday as mixed Chinese economic data pointed to an uneven economic recovery in the world's largest copper importer. While service sector activity surged more than expected to a 15-year high, softening growth in the manufacturing sector pointed to weaker demand for commodities.

Copper futures fell 0.2% to $4.1048 a pound, but were still set to gain over 7% for the first quarter.

But an economic recovery in China is still expected to underpin copper demand this year. Friday's data also indicates that a rebound is gaining steam, albeit at an uneven pace.