Gold rises on U.S. banking sector turbulence

COMEX gold prices witnessed another leg of rally and is poised for a third consecutive weekly gain of more than 3.5%, boosted by safe haven bids.

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The yellow metal started the week on a positive note, as investors rushed for haven assets, amid signs of failure of the Silicon Valley Bank in the US, after the bank took steps to shore up its capital position. The failure of SVB also gave rise to speculations that the Fed might go for a smaller 25 bps rate hike in the March FOMC meeting, from previous expectations of a 50 bps hike.

The failure of Silicon Valley Bank and Signature Bank this past weekend sparked concerns over banking stress contagion. The jury is still out on whether it's a few bad apples or the whole cart but taking no risks, governments were quick to emerge with monetary disinfectant on Monday. An article in the FT summed up the probable outcomes of the bank failure and its subsequent policymaker remedies. 1 Here's what they might lead to and what it might mean for gold.