Gold holds near record as Fed pause bets and banking fears support prices

Gold prices were hovering just below their record highs on Friday morning, caught between profit-taking and the weight of two competing forces: the possibility that the Federal Reserve might finally stop raising interest rates, and deepening anxiety about the stability of America's regional banks.

The metal had touched $2,080.72 an ounce late Wednesday—a record—before settling back to around $2,049.89 by early Friday trading. Futures contracts for June delivery were similarly steady, near $2,056.40 after hitting their own record of $2,082.80 earlier in the week. Both were on track for their best weekly performance in nearly two months, up between 3 and 3.6 percent.

The catalyst for gold's strength was a shift in how traders were reading the Federal Reserve's intentions. The central bank had raised rates again this week but signaled a more cautious, data-dependent path forward—language that markets interpreted as a possible end to the rate-hiking campaign that had been grinding on for a year. That prospect matters enormously for gold, which generates no yield and becomes less attractive to investors when interest rates climb. If the Fed paused, the opportunity cost of holding bullion would shrink. Futures markets were now pricing in better than a 90 percent probability that rates would hold steady in June.

But there was another, darker reason gold was finding buyers: fear. First Republic Bank had collapsed earlier in the week, and traders were now watching PacWest Bancorp with genuine concern that it might be next. The regional banking system, already stressed by the sharp rise in rates, was showing signs of strain. That kind of systemic anxiety typically sends money flowing into safe havens, and gold—the oldest of them—was catching that flow.

The dollar had weakened after the Fed meeting, which also helped gold prices. Treasury yields had fallen, and the greenback had followed them down, making bullion cheaper for buyers holding other currencies.

All eyes were now on the April nonfarm payrolls report, due to arrive later Friday. Markets expected the jobs market to show some cooling, but any surprise strength in the data could reignite fears of more rate hikes ahead. It was the kind of economic crossroads where a single number could shift the entire calculus.

Other precious metals were steadier. Silver was flat at $26.323 an ounce, while platinum had dipped 0.2 percent to $1,052.15. Copper, meanwhile, had ticked up slightly as Chinese markets reopened after the Golden Week holiday, buoyed by signs that consumer spending and travel demand had rebounded. But copper was still headed for its third consecutive week in the red, as traders fretted that economic weakness would eventually erode demand for the industrial metal. Manufacturing data from China had unexpectedly contracted in April, adding to those concerns.