By Rajesh Bhayani
While silver prices are inching towards all-time high, gold did achieve that feat on Wednesday when it hit a record high of 60,546 per 10 gram (MCX spot price). Currently, it continues to trade at above Rs 60,000.
“Prices of precious metals are rising on the back of continuous favourable news flows. Once these news stops and market reacts to the fundamental, it is advisable to take a directional call,” said Chirag Sheth, principal consultant South Asia and India for precious metals, a London- headquartered metal research firm.
While market players see the possibility of the rally continuing, there could be some correction in between in the next few weeks.
Gold prices have risen on the back of the hawkish approach of the US Federal Reserve and other central bankers to consistently raise interest rates to battle inflation. Then, there are fears of recession and failures of some of the banks, which have aggravated the situation.
Going ahead, the banking crisis could deepen, as recently pointed out by Raghuram Rajan, former governor of Reserve Bank of India. Banks like SVB fell due to high interest rates in the US, which were zero two years back have risen to 5% now. Banks invested in US treasury when prices were high and yield was low. As the rates rose, bond prices fell and banks will have to show mark-to-market losses in their books. This is a ‘sword of Damocles’ hanging over the markets. All these factors favour gold and there could be more flight of money to the yellow metal.
However, higher prices have had an adverse impact on gold buying. Gold traders see the demand falling though April, when there is buying for the marriage season as well the auspicious occasion of Akshaya Tritiya.
In the past two years, Akshaya Tritiya demand has seen over 20% growth. Traders, however, are not confident of that growth this time because of high prices.
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Some organised retail store chains are, however, hoping that things will improve. Ramesh Kalyanaraman, executive director, Kalyan Jewellers, said they continue to see robust consumer demand and revenue growth. “Though the consistent increase in gold price has resulted in a temporary dip in discretionary gold purchases, we are encouraged by the Akshaya Tritiya advance booking. We are also hopeful about the wedding demand kicking in later this month,” said Kalyanaraman.
He sees a changing mix of demand as people opt for alternative metals such as platinum, silver, rose gold and white gold. This shift is fuelled by various factors such as minimalism, cultural trends and the growing popularity of all-season jewellery.
