The current surge in gold prices notwithstanding, the demand for gold has not waned. Experts still see a lot of upside in gold prices. The market price of gold depends on a lot many variables like the value of Indian rupee, the exchange rate of dollar, money finding its way to other asset classes like equities and commodities and the interest rate hike by the US Fed. Going by the current set of things, it is believed the yellow metal is still left with a lot of gas and does not seem to have any downside risk. Even as global uncertainties persist, the allure of gold will be more spectacular going forward.
Last weekend’s collapse of Silicon Valley Bank (SVB) and the back to back closure of Signature Bank in the US have disillusioned people about investment in securities. A week back, Silvergate Capital, another US bank, had collapsed. Markets across the globe have hit a falling track. Indian markets are no exception to this. Sensex has shed a cumulative 2110 points over last three days as the banking crisis in the US is having a ripple effect on global equity markets.
Confidence of people in the banking system and investments in share markets has been dented following sudden crash of a number of banks in the US. In this backdrop, the demand for gold as a safe haven has been rising. Gold rates have firmed up over last few days. The banking crisis has stoked a five per cent rally in gold prices over last three days. Gold futures contract for the month of April 2023 opened upside of Rs56, 667 per 10 gm Tuesday. In international spot markets also, the price has gone up by 0.65 per cent at $1880 per ounce.
Over last few months, there is a surge in gold rates in India. With inflation still beyond the RBI’s comfort level, gold price may continue to remain firm going forward. The more the inflation, the higher the gold price and vice vesra. Ukraine-Russia war, banking crisis in the US and its negative spinoff on global securities markets will give support to gold rates. Yet, the precious metal still remains a good option for investment now. The overall trend for the gold will remain bullish in near to medium term. Investors will look to it as an instrument to hedge against inflation and global uncertainties.
Also Read: How Silicon Valley Bank went belly up in all of 48 hours
(Disclaimer: The opinion expressed in the article is writer’s. The website, in no way, endorses these views. Readers are advised to consult their personal financial advisors before taking any investments decision.)
