Gold ends $31 higher on renewed fears over US banking sector

Gold prices pared a strong gain at settlement today, May 2, as investors assessed the course of monetary policy by the Federal Reserve on renewed concerns over the state of the US banking system.

Treasury yields declined amid the growing fears over banks in the US as the KBW Bank Index sank. This came as PacWest Bancorp and Western Alliance Bancorp both led a deep selloff in regional lenders earlier in the day.

The number of open jobs in the US has slumped to the lowest level since May 2021 — a reflection of a labor market that is crawling back into balance after the Fed’s yearlong campaign to tame inflation.

Elsewhere, US President Joe Biden is trying to ease a debt limit standoff by inviting the four Congressional leaders to the White House on May 9, signaling the growing fears of a default.

This came after the Treasury warned the government could run short of cash to pay its bills as soon as June 1 if the debt ceiling was not raised or suspended.

Furthermore, investors are awaiting the Fed’s remarks about the outlook for monetary policy after its highly anticipated interest rate decision on May 9, amid expectations of a 25-basis-point rate hike.

In terms of trading, gold for June delivery jumped 1.6%, or $31.1, to close today’s session at $2,023.3 an ounce.

However, the US dollar index, which gauges the greenback's strength against a basket of six currencies, shed 0.2% to reach 101.93 points at 8:48 pm Makkah time.