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Gold Reaches Lifetime High During Once in a Lifetime Bank Crisis

Picture Source: Internet

During one of the worst banking crises in history, everyone’s favourite metal, gold, is soaring to touch a lifetime high of more than Rs 60,000 per 10 grams on the Multi Commodity Exchange (MCX).

The gold future was trading approximately 1.5% higher at Rs 60,474 during the day. At around 12:50 pm, the price of gold crossed the Rs 60000 mark. Gold prices also rose in the international market to cross the $2,000 an ounce mark for the first time in over a year.

Amidst the growing fears over the collapse of several US banks and Credit Suisse, the gold bullion has surged 6.5% in the previous week. This was the biggest rise in the commodity’s price since the start of the pandemic in March 2020. As the news about UBS’s acquisition of Credit Suisse for 3 Billion Swiss Francs rolled out, the bullion lost some of the gains during the day.

Analysts predict the price will reach as high as Rs 62,000 in the coming month, and the international prices will range between $2,050 and $2,185.

Investors considered the US dollar a haven for over 18 months or so, mainly due to the rising interest rates. Compared to gold, the metal seems non-yielding, and one can understand the appeal of the US Dollar. Although the current condition of the global banking sector seems much better when compared with the same in 2008-09, there have been recessionary fears.

During the US bank crisis, the investors’ interest in gold rekindled, seeing the volatility in the equity markets. Hence, metal prices have constantly been rising for the past 3 weeks. As the rates in the US rose, the dollar index fell, and crude prices slid, leading to a rise in the prices of gold. The prices will continue to rise in anticipation of a less aggressive rate hike by the US Fed because of the lack of enough headroom given the pressure on the global economy.

The US Fed is scheduled to meet tomorrow for a two-day Open Market Committee meeting to discuss the possible strategies to negate the impact of the said crisis, the result of which could further fluctuate the bullion prices. Last week, the Europe Central Bank meeting concluded with a 50-bps hike in interest rates, proving price stability more vital than financial stability. Since the Fed is ahead of the ECB in its hiking cycle, there are fewer chances that the US will hike rates by 50 bps.

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