On Monday, gold prices on the Multi Commodity Exchange (MCX) reached a record high for a single day as investors flocked to safe-haven assets in the wake of the US and European banking crises. The price of the precious metal increased by 60,455 per 10 grams (excluding 3% GST) on the MCX, while it reached a 31-month high of $2,009.21 per ounce on the international market (32.10 grams).
Consumer demand for the precious metal has decreased as a result of the approximately 5% price increase in just one week. Nonetheless, the worth of the holdings of individuals who invest in gold ETF plans and sovereign gold price bonds of mutual funds has climbed.
Shekhar Bhandari, president of global transaction banking at Kotak Mahindra Bank, described it as a flight to safety. Due to this, investors’ views on risky assets like stocks and bonds have shifted. The greatest time to buy gold is now, and its attraction as a safe haven will probably last for the upcoming quarters.
The price of gold serves as an insurance against inflation and a haven asset during unsettled times. With three banks failing in the US last week and Credit Suisse being purchased by UBS in Switzerland amid increasing interest rate regimes in those regions, the metal is surging as the US Fed and ECB scramble to create backstops. Also, it happens before the Fed’s rate-setting panel raises the federal funds rate on Wednesday. Despite being the world’s largest gold importer, with 763.7 tonnes of bullion imported in total last year, India’s domestic gold demand was negatively impacted by a sharp increase in the value of the dollar and a weak rupee.
The current price increase, according to Debjit Saha, chief analyst at Refinitiv Metals, LSEG, has significantly impacted consumer demand. “The $33 per ounce discount (840 per 10 grams) at the bank rate in the wholesale gold market here clearly shows the lack of demand.
Gold is mostly imported into the nation by banks that have been approved by the Reserve Bank of India and who do so on a consignment basis.
But, with a value of 98 tonnes, the government’s re-launched Sovereign Gold Price Bonds have begun to see increased interest from investors. As of December 27, 2022, there were 42,955 crores in client outstanding balances and 21,400 crores in net assets that Gold ETFs were managing. The COMEX may trade in the range of $1,985-2,015 per ounce and on the domestic front, it may trade in the same range. “Gold edged to a new lifetime high on the domestic front 60,000, as a wave of banking crisis shook global markets and kept bullion on track for its biggest weekly gain in three years,” said Navneet Damani, senior vice-president, commodity research at Motilal Oswal Financial Services-based exchanges. 59,800-60,600.”
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