CHENNAI: Gold turned into a more bankable asset and its prices going up as many American banks are going down, say experts. With gold at the Multi Commodity Exchange (MCX) breaking the Rs 60,000 threshold on Monday, March 20, the precious metal shone more brilliantly in the markets.

"About 7-8% more people are buying gold now than they were a month ago. The banking crisis in the west is the main cause of the rise in the price of yellow metal. Gold prices are rising due to central banks' injection of cash and anticipation of little to no interest rate increases. Gold has historically increased in value during times of unrest "Kama Jewelry's MD, Colin Shah, said. Shah thinks it may take some time for the current global scenario to improve. Central banks all across the world are increasing their gold holdings. "In the coming months, we anticipate gold to continue rising and reach new highs. It is anticipated to trade domestically in the range of Rs 61,000-62,000/10gm. It may scale levels of USD 2,050 to 2100 per ounce internationally "he said.

A new high in gold prices indicates slower economic growth, lower interest rates, and enough of liquidity to help the system manage the current scenario.

"Bullions continue surge, with gold on the domestic front hitting a new life time high of over Rs 60,000," said Navneet Damani, Senior VP, Commodity Research at Motilal Oswal Financial Services. "A wave of banking crises shook global markets and put bullion on track for its biggest weekly rise in three years, while bets solidified for a less aggressive Fed in its fight against inflation," he added.

The failure of Silicon Valley Bank in the US has brought attention to banks' susceptibility to much higher interest rates, and a sell-off in Credit Suisse shares has exacerbated the market turbulence. On the other hand, everyone is now focused on the Fed's policy meeting later this week after the ECB announced a 50 basis point rate hike last week.

"The Fed is likely to increase rates by 25 basis points, but the likelihood of a halt is sharply rising, supporting the surge in safe-haven assets. There were numerous updates on US banking issues over the weekend, which marginally hurt safe-haven assets. In a deal supported by a sizable Swiss guarantee and anticipated to finish by the end of 2023, UBS agreed to acquire Credit Suisse, which has been around for 167 years, for USD 3.23 billion and to take on up to USD 5.4 billion in losses. 

Major central banks like the Fed, ECB, BOJ, and BOE announced a coordinated central bank operation to increase liquidity via the USD-Swap line in the meanwhile. The volatility is anticipated to remain elevated in light of these announcements." "A wider trend on COMEX might be in the region of USD 1985-2015, while on the domestic front prices could be expected to float in the range of Rs 59,800-60,600," Damani noted.

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