Gold prices end lower, but score gains for the month and quarter

Price action

• The June gold contract
  GC00,
  -0.17%

  GCM23,
  -0.17%
  declined by $11.50, or 0.6%, to settle at $1,986.20 per ounce on Comex after trading as high as $2,005.50. Prices, based on the most active contracts, ended 8.1% higher for the month and saw an 8.8% rise for the quarter, after settling Thursday at their highest since March 10, 2022, according to Dow Jones Market Data.

• Silver for May delivery
  SI00,
  +0.02%

  SIK23,
  +0.02%
  rose 17 cents, or 0.7%, to $24.156 per ounce, settling nearly 15% higher for the month and 0.5% higher for the quarter.

• Palladium for June delivery
  PAM23,
  +0.03%
   edged up by $4.40, or 0.3%, to $1,468 per ounce, but down more than 18% for the quarter, while platinum for July
  PLN23,
  -0.22%
  added $6.20, or 0.6%, to $1,003.10 per ounce, posting a quarterly decline of 7.4%.

• Copper for May delivery
  HGK23,
  -0.19%
  settled at $4.0945 per pound, up a fraction of a cent for the session to gain nearly 7.5% for the quarter.

Market drivers

Gold prices moved higher for the month “primarily on safe-haven investment demand following the failure of Silicon Valley Bank and Signature Bank, and the almost-failures of First Republic Bank
FRC,
+4.36%
and Credit Suisse
CS,
-1.58%,
” Jeff Klearman, portfolio manager at GraniteShares, which runs the GraniteShares Gold Trust
BAR,
+0.74%,
told MarketWatch. “The flight-to-quality market sentiment led to sharply lower Treasury rates, also bolstering gold prices.”

While banking sector concerns have recently diminished, expectations that the Federal Reserve will pause its interest-rate hikes and the possibility of the Fed lowering rates this year have also increased, he said. “These expectations have been mainly powered by growing expectations of tighter credit conditions as a result of regional banks restricting lending activity in light of their current situation,” he noted.

This set of expectations has also supported gold prices as Treasury yields  “continue to be pressured lower and the U.S. dollar weakens,” said Klearman.

On Friday, U.S. government data showed that the cost of U.S. goods and services rose by a milder 0.3% in February. Prices had climbed by a sharp 0.6% in January, based on the PCE index.

Inflation remains a concern but is well off its recent highs and is seemingly trending lower, Klearman said. That supports expectations of a less aggressive Fed monetary policy, pressuring Treasury yields and the dollar, which is supportive for gold.

The yellow metal posted a second consecutive quarterly gain and its biggest one-month percentage rise since July 2020, according to Dow Jones Market Data.

Read: Natural gas is among the worst-performing commodities in the first quarter, while steel, iron ore strengthen

The most active June gold contract touched highs above $2,000 Friday. The precious metal, however, continues to pause just below that key level as “investors try to decide whether to push through the big round number or not,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “With the banking situation stabilizing, gold has levelled off for now — but this could change depending on how developments evolve from here.”

Adrian Ash, director of research at BullionVault, told MarketWatch Friday that with the afternoon London gold fix, a transaction price set by gold dealers in London, at $1,980 an ounce, physical bullion set new record month-end highs in the dollar, euros, yen, British pound and other major reserve currencies.

The first quarter of 2023 has been “another roller coaster for precious metals,” said Ash. “Silver screamed loudest, marking its steepest one-month drop since the fall of 2020 in February, before making its steepest rebound since December 2020 in March.”