Gold futures rise for the week as bank worries spark rush to safety

Bars of gold are seen at the Krastsvetmet company, one of the world's largest producers of precious metals in Moscow, Russia on January 31, 2023. 

Alexander Manzyuk | Anadolu Agency | Getty Images

Gold prices ended a volatile week higher on Friday as bank contagion fears bolstered both safe-haven demand and bets on a pause in Federal Reserve rate hikes, adding to the appeal of zero-yield bullion.

U.S. gold futures lost 0.6% to settle at $1,983.80 per ounce. Futures also gained 0.5% for the week, having climbed to its highest level in a year above $2,000 on Monday.

Banking shares were trounced again on Friday, with European giants Deutsche Bank and UBS knocked by worries that regulators and central banks have yet to contain the worst shock to the sector since the 2008 financial crisis.

"Any concern that pops up about U.S. banks being undercapitalized is going to be a factor for gold to rise," said Bob Haberkorn, senior market strategist at RJO Futures. "The dips that you see will be bought up fairly quickly in this environment."

Gold investors also took stock of comments from St. Louis Federal Reserve president James Bullard and Atlanta President Raphael Bostic who both acknowledged that while banking sector woes made the central bank's interest rate call challenging, the focus was still on bringing down inflation.

The Fed this week raised rates by an expected quarter of a percentage point but signaled it was on the verge of pausing.

Commerzbank expects gold to climb to $2,000 per troy ounce by the end of the year citing Fed projections raising the prospect of rate cuts for 2024.