Global Gold Prices Experience Downward Pressure, Trailing Domestic Rates by 19 Million VND/Tael


Global Gold Prices Experience Downward Pressure, Trailing Domestic Rates by 19 Million VND/Tael

Illustration photo – Photo: Bloomberg.

World gold prices struggled to breach the $2,000/oz threshold on Wednesday’s trading session, remaining subdued after a significant drop the previous day. The unexpected surge in US inflation data raised speculations that the Federal Reserve (Fed) would uphold higher interest rates for an extended period. Notably, the domestic spring gold bar prices reached 78 million VND/tael, holding a premium of about 19 million VND/tael compared to international gold rates.

At the New York closing of the latest trading session, the spot gold price fell by 0.5 USD/oz, settling at 1,993 USD/oz. On Tuesday, global gold prices plummeted by 27 USD/oz, marking a decline of approximately 1.3%.

The release of the US Department of Labor’s report on Tuesday indicated a 0.3% monthly rise in the Consumer Price Index (CPI) for January, surpassing last year’s figures by 3.1%. Dow Jones economists had initially projected a monthly surge of 0.2% and a yearly increase of 2.9%.

Traders are currently predicting a 78.5% likelihood of the Fed commencing interest rate cuts in June, with the probability of rate cuts from May 5 decreasing to 38.5%. Prospects for the Fed to initiate rate cuts in March have diminished significantly. It is believed that the Fed may now only implement 2-3 interest rate reductions this year, as opposed to the previously anticipated 5-6.

Gold, being a non-interest-bearing asset, faces a challenging environment in a prolonged higher interest rate scenario. The sentiments conveyed by Chicago Fed President Austan Goolsbee, emphasizing the inevitability of inflation falling towards the Fed’s 2% target, have contributed to a decrease in US Treasury bond yields and the USD exchange rate. This shift has alleviated the downward pressure on gold prices, preventing a steeper decline this quarter.

World gold price developments in the past 6 months. Unit: USD/oz – Source: Trading Economics.

The decline in the 10-year US Treasury bond yield by 5 basis points, reaching 4.267%, and the slight dip in the Dollar Index to 104.72 points, coupled with Mr. Goolsbee’s cautious comments, have positively impacted gold prices.

While gold prices face uncertainties related to Fed decisions and inflation data, domestic jewelry businesses have reopened after the Tet holiday. Predictions suggest heightened activity in the domestic gold market, with increased demand for gold during the God of Wealth Day on the 10th day of the lunar calendar.

Early morning pricing by Phu Quy Group listed SJC gold bars at 76.45 million VND/tael (buying) and 78.15 million VND/tael (selling) in the Hanoi market. Despite a nearly flat buying price, the retail price of SJC gold bars decreased by 700,000-800,000 VND compared to pre-Tet levels. The retail price of gold rings remained largely unchanged. The Asian market’s spot gold price stood at 1,994.1 USD/oz during the early hours, up 1.1 USD/oz from the previous US closing session. Converted at Vietcombank’s USD selling rate, this equates to approximately 59 million VND/tael.

In comparison to the converted global gold price, the retail price of SJC gold bars holds a premium of over 19 million VND/tael, while gold ring prices carry a premium of approximately 6.7 million VND/tael.

Vietcombank’s early morning USD quotes were 24,200 VND (buy) and 24,570 VND (sell).

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