Gold pulls back as banking jitters ease

Gold prices retreated on Wednesday as investors trickled back into riskier assets betting that risks of contagion from the global banking crisis have been curbed for now.

Spot gold was trading 0.4% lower at $1,965.89 per ounce, as of 0924 GMT. U.S. gold futures slipped 0.3% to $1,967.50.

Gold has retreated as “markets are going risk-on as fears of contagion within the banking sector abates,” said independent analyst Ross Norman.

European shares rose, echoing an upbeat mood in Asian markets.

Further pressuring bullion, the U.S. dollar firmed 0.2%. A stronger dollar makes bullion more expensive for overseas buyers.

Gold traders, meanwhile, remained focused on the Federal Reserve’s interest rate strategy, with investors pricing in a 40.5% chance of a 25-basis-point hike in May, according to the CME FedWatch tool.

Last week, the central bank suggested it was on the verge of pausing future hikes, but Fed Chair Jerome Powell reiterated the Fed’s commitment to reining in inflation.

“Our outlook for the second half of 2023 for gold remains positive but not outrageously so as inflation persists and the Fed continues to try and edge rates higher until something breaks,” Norman added.

Higher rates tend to dull zero-yield gold’s appeal.

“The Fed will have to choose between higher inflation, a harder landing or financial instability – all outcomes will keep safe havens in play,” likely prompting gold to retest and pierce all-time highs ($2,070/oz) this year, metals firm MKS PAMP said in a note.

U.S. consumer confidence unexpectedly increased in March, but Americans are becoming a bit anxious about the labour market, a survey showed on Tuesday.

Spot silver fell 0.2% to $23.22 per ounce, platinum eased 0.3% to $960.23 while palladium was up 0.1% at $1,420.11.