Investing.com - Gold prices fell in Asia on Friday as investors took profits on overnight gains and assessed anew the path of interest rates in the U.S.
On the Comex division of the New York Mercantile Exchange, gold for April delivery fell 0.64% to $1,239.80 a troy ounce.
Silver for March delivery eased 0.25% to $15.755 a troy ounce, while copper for March delivery was flat at $2.013 a pound.
Overnight, gold skyrocketed more than $60 an ounce at session highs on Thursday, surging to its highest level in more than a year, as sharp declines in European banking stocks sent tremors through global markets pushing investors to seek shelter in the safe-haven asset.
With the massive gains, gold posted its strongest one-day gains since December 1, 2014 when it soared nearly 7% to eclipse $1,220. Gold closed higher for the seventh consecutive session and the ninth time in the last 10 sessions. The precious metal is now up by approximately 18% on the quarter and is on pace for its strongest three-month period in 30 years.
In Europe a host of major banking stocks fell precipitously, extending heavy losses from earlier in the week, after Sweden's Central Bank unexpectedly lowered its repo rate deeper into negative territory on Thursday. The move exacerbates concerns that other central banks in the euro zone could follow suit, amid low employment, weak economic growth and stubbornly low inflation. More broadly, numerous indices throughout Europe closed down between 2 and 3%, while the Euro Stoxx 50 fell to its lowest since late-2013.
At the start of the week, stocks in the euro zone fell to fresh 16 month lows as the cost of subordinate debt of European financial firms soared more than 12% on the session to its highest level in nearly three years. It came as crude futures slipped below $30 a barrel, placing further pressure on banks and the high-yield market.
Last month, the Bank of Japan rattled global markets with a surprising decision to implement a negative interest rate policy for the first time in central bank history. With the European Central Bank's deposit rate already in negative territory, it marked the first time two of the world's top three central banks held rates below zero simultaneous.
The debate on whether central banks should adopt a negative interest rate policy was thrust back into focus on Wednesday when Federal Reserve chair Janet Yellen testified on Capitol Hill that she is unsure whether the U.S. central bank has the legal authority to push rates below zero.
While Yellen testified that she is "not aware" of any restrictions that would prevent the Fed from offering negative rates, she does not expect that it will be forced to cut rates anytime soon. At a historic meeting in mid-December, the Federal Open Market Committee (FOMC) raised short-term interest rates for the first time in nearly a decade by lifting the target range on its benchmark Federal Funds Rate by 25 basis points to 0.25 and 0.50%.
On Thursday, Yellen told the Senate Banking Committee that although the Fed has not taken prospects for a negative interest rate policy off the table, she reiterated that it is unlikely the FOMC will lower short-term rates given its current economic outlook. Any rate hikes from the Fed this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.