Thursday, 28 Sep, 2023


Gold price climbs to life-time high on bank crisis in US. Sell, hold or buy?

Business Desk |
Update: 2023-03-18 15:45:55
Gold price climbs to life-time high on bank crisis in US. Sell, hold or buy?

On account of bank crisis in US, gold price climbed to life-time high of ₹59,461 per 10 gm on MCX, bettering previous high of ₹58,847 per 10 gm during the Friday session. 

The yellow metal price finished ₹1,414 per 10 gm higher at ₹59,420 levels on the weekend session, logging weekly gain of around 5.86 per cent against the previous weekend close of ₹56,130 per 10 gm. In international spot market, gold price finished at $1,988.50 per ounce levels, clocking 6.48 per cent weekly rise against the previous week close of $1,867 per ounce.

According to bullion market experts, gold rates today are comfortably placed above the crucial $1,930 per ounce hurdle and it is poised to touch $2,000 per ounce levels in international market. On MCX, gold prices have support placed at ₹57,500 and ₹56,800 level and the yellow metal is poised to touch ₹60,000 per 10 gm levels in near term as outlook for the precious bullion metal is still bullish.

On reasons for bull trend in gold rates today, market expert Sugandha Sachdeva said, "Amid the turmoil caused by the troubled banks in the US, and the Swiss banking giant -Credit Suisse shares nursing steep losses, gold prices rose in a vertical manner. Investors are seeking refuge in gold for its safe haven status and as a store of value."

Correction in US dollar

On impact of ECB rate hike, Sugandha Sachdeva said, "The ECB surprised the markets with a rate hike of 50bps largely ignoring the impact of higher rates on the banking system which led to a sharp jump in the Euro at the expense of the US dollar, while buttressing gold prices. The new economic landscape underscores vulnerabilities in the financial system while favoring interest in the precious metals where silver too soared in tandem with gold, garnering massive gains of around 9.22 percent for the week."

Gold gains safe haven appeal

Anuj Gupta, Vice President — Research at IIFL Securities said, "Due to rising bank crisis in US, Dollar Index has been nosediving. This has put equity, treasury yield, bond and other assets under pressure. Hence, investors are fishing out money from these assets and investing in gold to remain safe from the current turmoil."

US Fed in focus

Anuj Gupta of IIFL Securities said that much will depend upon the outcome of US Fed's FOMC meeting scheduled from 21st March to 22nd March 2023 as any further hike in US Fed rate hike may further fuel the gold price rally.

Expecting US Fed to turn dovish, Sugandha Sachdeva said that the collapse of three prominent US banks — Silicon Valley Bank, Signature Bank and First Republic Bank — had raised expectations that the Fed could turn dovish and dial back aggressive tightening to allay market fears of financial stress.

Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart said, "Gold will benefit from any pause in the Fed's rate-hike cycle, demand for gold against the dollar will increase, and the opportunity cost of holding a non-yielding asset will also be low. However, the Fed is likely to remain accommodative on monetary policy as long as inflation remains stable. Investors are advised to remain vigilant on the US Fed meeting, in which it is unclear how much the interest rate hike will be."

Gold price outlook

Speaking on gold price outlook for near term, Sugandha Sachdeva said, "With gold prices having comfortably breached the key hurdle of $1,930 per ounce, the outlook for next week indicates a continuation of the bullish momentum in the early part of the week. Even though volatile swings will be observed with a focus on the highly anticipated Fed’s meeting outcome, gold looks poised to test levels of around ₹60,000 per 10 gm and $2,000 per ounce in the near term. Key support for the precious metal is pegged at ₹57,500 per 10 gm and subsequently at ₹56,800 per 10 gm mark."

Source Mint

BDST: 1545 HRS, MAR 18, 2023

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