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Gold Prices Surge On Credit Suisse Crisis

Gold prices rose more than 1% on Wednesday, reaching the highest level since the beginning of February, as the latest banking sector crisis has turned investors away from seemingly riskier assets and driven them toward the safety of bullion. Spot gold rose 1.2% at $1,924.63 an ounce as of 11:56 am EST (1556 GMT). U.S. gold futures gained 1.1%, ending at $1,931.30.

European banking stocks were under pressure once again, with Credit Suisses (CSGN.S) shares declining as its biggest investors said they were not in a position to offer more financial help for the Swiss lender. “It is the ultimate safe-haven type of trading. There has been a lot of anxiety over Credit Suisse, and European banks are actually getting quite stressed right now.

So that is just a full-blown run for safety,” said Phillip Streible, principal market strategist for Blue Line Futures in Chicago. Gold prices hit record levels in the U.K., and the bullion in the euro also surged toward its record peak last year. 

“People are going to the U.S. Treasuries, gold, silver, and the dollar. They’re exiting riskier assets like U.S. equities and economically-sensitive metals like copper, platinum and palladium,” Streible said.

Gold has surged even as the dollar has sharply rallied. A stronger greenback typically would have undermined demand for bullion priced in dollars. Spot silver rose 0.6% at $21.82 an ounce, while platinum fell 2.4% at $958.76, while palladium lost 3.1% at $1,459.79.

Overall attention is still focused on the next step by the Federal Reserve in lowering interest rates, while assessing data showing higher February inflation in a context of two bank failures in the region. 

Markets gave a 57.1% probability that the Fed would keep the benchmark interest rate at its current rate during the policy meeting March 21-22. Gold is traditionally considered a hedge against inflation, but higher rates raise the opportunity cost of holding a non-yielding asset. 

Craig Erlam, a senior markets analyst with OANDA, said volatility is expected in the coming days before the Fed’s meeting.

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