Gold falls back to $2,000 after a brief run on US banking issues

• First Republic shares plummet amid skepticism about bailout plan
• US PCE price index data due this week
• Swiss gold exports to China rose in March

April 26 (Reuters) – Gold fell on Wednesday as yields recovered and focus returned to the forthcoming economic data after briefly surging above $2,000 amid renewed worries about the US banking turmoil.

Spot gold is down 0.6% to $1,985.80 an ounce by 12:25 p.m. EDT (16:25 GMT), after earlier rising to $2,009.32. US gold futures were down 0.4% to $1,996.20.

Shares in First Republic Bank (FRC.N) hit a record low after a report said the US government was unwilling to intervene in the bailout process for the troubled lender.

“That was the trigger for the gold price to bounce back to slightly higher levels,” said Daniel Ghali, commodity strategist at TD Securities.

But overall, trend-following algorithms have effectively reached their maximum long positions, Ghali added.

Benchmark US Treasury yields rebounded from a nearly two-week low, increasing the opportunity cost of holding zero-rate bullion.

Gold declined even as the dollar slipped 0.4%, while investors also took stock of the optimistic risk sentiment fueled by strong earnings.

Traders now focused on the quarterly US GDP data due on Thursday, followed by the Fed’s favorite indicator of inflation on Friday, followed by the Index of Personal Consumption Spending.

Markets had priced in about a 3-in-4 chance that the US Federal Reserve would hike interest rates by 25 basis points at its May 2-3 meeting.

Those odds were down due to “resurgent fears that there’s always more than one cockroach when it comes to the US regional banking crisis,” Ghalli said.

Safe-haven gold hit a more than a year high of $2,048.71 in mid-April as the US banking crisis unfolded.

“Retail, discretionary traders and the like remain very underexposed, a source of dry powder, especially as the market ramps up expectations of rate cuts,” said Paul Wong, market strategist at Sprott Asset Management.

Silver fell about 1% to $24.8 an ounce, platinum was up 0.2% to $1,088.50 and palladium was up 1.9% to $1,511.23.

Reporting by Arundhati Sarkar in Bengaluru; Edited by Sherry Jacob Phillips

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Deep Kaushik Vakil

Thomson Reuters

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