Investing.com -- Gold futures retreated from 12-month highs, one day after enjoying one of its strongest one-day moves since the Financial Crisis, as European banking stocks recovered on Friday, inspiring a rally among global equities.
On the Comex division of the New York Mercantile Exchange, gold for April delivery wavered between $1,233.30 and $1,248.70 an ounce, before closing at $1,237.50, down 10.60 or 0.85% on the session. On Thursday, gold surged as much as $60 an ounce, posting its highest one-day move since December 1, 2014 when it soared by nearly 7%. Despite Friday's losses, gold has still closed higher in six of the last eight and seven of the last 10 sessions. The precious metal is also up by nearly 16% on the new year, on pace for one of its strongest three-month periods in 30 years.
Gold likely gained support at $1,046.20, the low from December 3 and was met with resistance at $1,284.10, the high from February, 2, 2015.
In Europe, banking stocks rallied more than 4% after Deutsche Bank (DE:DBKGn) AG NA O.N. (N:DB) announced that it will buy back $5.4 billion of its senior debt in an effort to reduce panic among investors. It came days after credit default swaps on the German bank's junior bonds surged more than 10% in a single session to reach its highest level on record. The European bond market has come under intense pressure in recent weeks from crashing oil prices, outflows from sovereign-wealth funds and strong indications that the European Central Bank will lower interest rates deeper into negative territory when its Governing Council holds its next monetary policy meeting in March. Entering Friday's session, banking stocks in the euro zone had crashed more than 25% since the start of the year.
Federal Reserve chair Janet Yellen capped a two-day appearance before Congress on Thursday by testifying that the U.S. central bank has not taken negative interest rates off the table, even as the prospects of cutting rates remains unlikely. Over the last several months, a host of central banks have adopted Negative Interest Rate Policies (NIRP) as a tool for staving off deflation and bolstering economic growth. Under the policy, central banks charge financial institutions for parking excessive reserves at their banks as a way of spurring lending. Critics of the practice argue that it may either severely restrain the profits of major banks or force them to pass the costs off to customers by increasing fees.
As banking stocks around the world have fallen steeply this week, investors have piled into safe-havens such as gold, U.S. Treasuries and the Japanese yen.
Investors also piled into gold on Thursday after Yellen continued to reiterated that the Fed will not take a "preset path" for normalizing policy during its first tightening cycle in nearly a decade. Following the Federal Open Market Committee's historic rate hike in December, the FOMC sent strong indications that it could raise short-term interest rates as much as four times this year. While Yellen did not address whether the FOMC will hold short-term interest rates steady at its March meeting, there is a strong probability the Fed will raise rates fewer than two times in 2016, according to current market expectations.
Any rate hikes this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.45% to an intraday high of 96.25. Since the FOMC released its latest monetary policy statement on Jan. 27, the dollar has fallen by approximately 4%.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for March delivery fell 0.019 or 0.12% to 15.775 an ounce.
Copper for March delivery added 0.023 or 1.12% to 2.028 a pound.