Gold settles at 11-month high amid bank concerns

The news shaping the markets today

The US announced plans to provide new military aid of $350 million, including ammunition, to Ukraine. The safe-haven US dollar index rose this morning.

New Zealand posted a trade deficit of NZ$0.714 billion in February, versus a gap of NZ$0.715 billion in the year-ago period, exerting pressure on the NZD/USD forex pair.

South Korea’s producer prices rose 4.8% year-over-year in February, versus a 5.1% increase in the prior month, which sent the KRW/USD pair lower in forex trading this morning.

The Eurozone announced a trade deficit of €30.6 billion in January, wider than the €30.2 billion gap recorded in the year-ago period, which exerted pressure on the EUR/USD forex pair.

Chile’s gross domestic product contracted by 2.3% year-over-year in the fourth quarter, versus 0.2% growth in the prior period. The news sent the CLP/USD pair lower in forex trading this morning.

What’s happening: Gold prices moved higher on Monday after recording gains last week.

What happened: The yellow metal settled at its strongest level in around eleven months in the session.

Investors bought more safe-haven assets amid concerns around a global banking crisis, following Credit Suisse’s takeover by UBS.

Why it matters: SVB Financial Group, the parent company of Silicon Valley Bank, filed for Chapter 11 bankruptcy protection in New York and announced plans to seek a court-supervised reorganisation.

Credit Suisse had earlier secured up to CHF 50 billion (around $54 billion) from the Swiss National Bank. UBS Group announced plans to acquire the bank for CHF 3 billion (around $3.25 billion), with the deal expected to close by yearend.

Concerns around the banking sector resulted in a sharp increase in the demand for gold, as investors moved to safe-haven assets.

Markets now expect the US Federal Reserve to hike interest rates by 25 basis points at its upcoming meeting. Gold also received support from speculations of the Fed ending its rate hike cycle soon.

A decline in the US dollar lifted gold demand. The US dollar index, which measures the greenback’s performance versus a basket of major rivals, fell around 0.3% to 103.39 on Monday.

US data released on Friday also showed consumer sentiment declining to 63.4 in March, falling for the first time in four months. The US leading economic index also fell by 0.3% in February, recording its 11th straight month of decline.

Gold futures for April delivery climbed $9.30, or 0.5%, to close at $1,982.80 per ounce on the Comex, after adding 5.7% last week. The yellow metal recorded its highest settlement since April 18, 2022, and touched $2,014.90 earlier in the session, the strongest level since March 10, 2022.

Silver futures for May delivery gained 0.8%, to close at $22.646 per ounce, the highest level in around six weeks. The white metal had recorded a 9.5% gain last week.

Copper futures for May gained 1.5% to finish at $3.9515 per pound, after falling around 3.4% last week. Platinum futures for July rose 1.7% to close at $997.40 per ounce, while palladium futures added around 1.1% to settle at $1,400.60 per ounce.

What to watch: Traders now await the US Fed’s interest rate decision, scheduled for Wednesday. Markets will also keep an eye on various government moves to avert a global banking crisis.

The markets today

Credit Suisse Group will be in focus today following news of its potential acquisition

Context: UBS Group AG announced plans to acquire troubled Credit Suisse for a huge amount, but the Swiss bank’s shares fell sharply on Monday.

Details: UBS agreed to buy peer Credit Suisse for CHF 3 billion (around $3.23 billion) in an all-share transaction.

UBS also agreed to assume losses worth up to CHF 5 billion (around $5.4 billion) in a transaction brokered by the Swiss authorities to avoid further turmoil in the banking sector.

Credit Suisse’s shareholders will receive 1 UBS stock for every 22.48 Credit Suisse stock they hold, which translates to a price of CHF 0.76 per share and represents a discount of around 60% of Credit Suisse’s closing price on Friday.

The deal is projected to strengthen UBS’s position as a global wealth manager and is expected to create a business with over $5 trillion in total invested assets and sustainable value opportunities. UBS expects the combination to be accretive to its earnings by 2027.

“This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure,” UBS Chairman Colm Kelleher said on Monday.

Credit Suisse’s shares tumbled 53% to close at around 94 cents on Monday, while UBS’s stock gained 3.3% to settle at $18.80.

What are expectations: Markets expect the acquisition to provide support to the global markets. Investors will also keep an eye on the execution of the deal.

Other Markets: European indices closed higher on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.93%, 1.12%, 1.27% and 0.98%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Eurozone’s ZEW Indicator of economic sentiment, construction output and European Union new passenger car registrations, UK’s public sector net borrowing, Germany’s ZEW economic sentiment index and ZEW indicator of current conditions, Canada’s inflation rate, US Redbook index, existing home sales and API crude oil stocks, Russia’s consumer confidence, as well as Argentina’s balance of trade.