Famously known as the ‘safe haven’ of investments – gold jumped above Rs 60,000 per 10 gm in India, making a record high.
Despite banking woes in the US – probably the worst period after the global recession of 2008-2009 – gold futures gained more than 1.5 percent to Rs 60,299 per 10 grams on March 20. In the international market, gold surged 0.57 percent to cross $2,000 and trade at $2,001.6 an ounce.
The crises at Silicon Valley Bank, Signature Bank, and Credit Suisse are making investors take shelter in gold as a safe-haven asset. Weakness in US bond rates pulled the Dollar index lower, pushing gold prices higher.
Gold prices have hit a lifetime high in India, Australia, and the UK, while they are at an 11-month high in the US. The commodity has become more lustrous for investors as it gained more than 5.5 percent on a weekly basis.
Banking meltdown
Two banks in the US – Silicon Valley Bank and Signature Bank – have collapsed, while Swiss lender Credit Suisse and US-based First Republic Bank struggled to secure support to survive.
In the bid to aid lenders and meet depositors’ needs, the US Federal Reserve said it has created the Bank Term Funding Program to provide banks and other depository institutions with emergency loans. JPMorgan Chase & Co. said that the Fed Reserve’s new backstop programme could inject anywhere up to $2 trillion in liquidity.
However, investors are waiting to see if the US Federal Reserve will hike interest rates one more time and if it will provide guidance for the bullion markets. Fed Chair Jerome Powell has signalled that the central bank might accelerate its interest-rate-hike campaign in the face of persistent inflation.
European Central Bank President Christine Lagarde said the ECB “stands ready” to provide emergency support to eurozone lenders after Credit Suisse was forced to seek help. The Bank of England is set to announce its monetary policy on March 22, with inflation data due later this week.
Consumer price inflation fell 10.1 percent in January, suggesting the interest-hiking cycle was having the desired effect. The data released in January showed GDP growth of 0.3 percent, pointing to a shallower downturn, which was otherwise feared.
However, BoE governor Andrew Bailey told investors not to assume that the UK’s interest rates “are now on an inevitable long march upwards,” according to reports.
Canada and Japan, too, are set to announce inflation data this week. The expectation in Canada is for a drop to 5.4 percent against a previous reading of 5.9 percent, while for Japan the consensus is for a decline to 3.1 percent in February from 4.2 percent in January.
The shining
“Such geopolitical tensions have given a lot more infusion into gold prices rising higher. Currently, we are in a financial banking crisis after SVB and Credit Suisse, which will continue to support gold strongly in 2023. Investors should keep strong allocation to gold,” said Jateen Trivedi, VP of research at LKP Securities.
“We expect before the Fed policy outcome gold prices should consolidate in the upper range with a positive bias. Comex spot gold has support at $1,959/1,940 per ounce and resistance at $2,010/$2,023 per ounce for the day. MCX Gold April futures have support at Rs 58,900 per 10 grams and resistance at Rs 60,400 per 10 grams,” said Saumil Gandhi, a senior commodities analyst at HDFC Securities.
The market is set to pay close attention to the US Fed this week along with policy announcements from the BoE and macro data from Canada and Japan.
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