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

Ashish Dhawan buys stake

Due to the US bank crisis, gold prices today on the MCX reached a lifetime high of 59,461 per 10 gm, surpassing the previous high of 58,847 per 10 gm set on Friday. The yellow metal price increased by $1,414 per 10 gm during the weekend session to conclude at 59,420, marking a weekly gain of about 5.86% compared to the previous weekend’s close of 56,130 per 10 gm. On international spot market, gold price finished at $1,988.50 per ounce levels, registering 6.48 per cent weekly climb over the previous week close of $1,867 per ounce.

Experts in the bullion market claim that gold prices are currently comfortably over the critical $1,930 per ounce threshold and that it is about to reach $2,000 per ounce levels on the global market. The 57,500 and 56,800 level on the MCX serves as support for gold prices, and the yellow metal is on track to reach 60,000 per 10 gm levels in the near future as long as the outlook for precious metal bullion remains favourable.

According to market expert Sugandha Sachdeva, there are several reasons why gold prices are currently rising “Gold prices climbed vertically in the midst of the turbulence brought on by the struggling banks in the US and the enormous share losses suffered by the Swiss banking behemoth Credit Suisse. Due to gold’s status as a safe haven and as a store of value, investors are turning to it for protection.”

Adjustment to the US dollar
ECB rate hike impact, according to Sugandha Sachdeva: “The ECB shocked the markets with a rate increase of 50 basis points while largely ignoring the effects of higher rates on the banking sector. This caused the euro to spike sharply against the US dollar while supporting gold prices. The new economic climate highlights financial system vulnerabilities while encouraging demand in precious metals. Silver prices rose alongside gold this week, posting enormous gains of almost 9.22 percent.”

The attractiveness of gold as a safe refuge
Vice President of Research at IIFL Securities, Anuj Gupta, stated: “The Dollar Index has been falling because of the US financial crisis. As a result, assets such as bonds, treasury yield, and stocks have been under pressure. In order to protect themselves against the current unrest, investors are taking money out of these assets and putting it in gold.”

Concentrate on the US Fed
According to Anuj Gupta of IIFL Securities, the outcome of the US Fed’s FOMC meeting, which is slated for March 21–22, 2023, will be crucial since any additional rate hikes by the US Fed might further boost the uptrend in gold prices.

Sugandha Sachdeva predicted that the US Federal Reserve would shift to a more dovish stance, noting that the failure of three notable US banks—Silicon Valley Bank, Signature Bank, and First Republic Bank—had increased market speculation about the possibility of financial crisis.

Senior Commodities Research Analyst at Swastika Investmart Nirpendra Yadav stated, “Any break in the Fed’s rate-hike cycle will be advantageous for gold, as will demand for the metal relative to the dollar and the opportunity cost of keeping a non-yielding asset. But, as long as inflation stays steady, the Fed is likely to maintain its accommodating monetary policy. Investors are encouraged to monitor the US Fed meeting closely because it is uncertain how much of an interest rate hike will take place.”

Prognosis for gold prices
On the short-term view for gold prices, Sugandha Sachdeva said: “Given that gold prices easily overcame the important threshold of $1,930 per ounce, the outlook for the next week points to a continuation of the bullish trend in the week’s opening hours. Although there may be erratic swings with an eye on the highly anticipated outcome of the Fed meeting, gold appears set to test levels of roughly 60,000 per 10 gm and $2,000 per ounce in the near future. The precious metal’s crucial support levels are set at 57,500 per 10 gm and thereafter at the mark of 56,800 per 10 gm.”

Disclaimer: CurrencyVeda does not endorse the opinions or suggestions expressed above by specific analysts or brokerage firms. Before making any financial decisions, we suggest investors to consult with licenced professionals.

Leave a Reply

Your email address will not be published. Required fields are marked *