Climbing Gold Prices Amidst Middle East Tensions: The Ongoing Sell-Off by the ‘Shark’ SPDR Gold Trust


Climbing Gold Prices Amidst Middle East Tensions: The Ongoing Sell-Off by the ‘Shark’ SPDR Gold Trust

Despite the support stemming from risk prevention, gold prices remain in a challenging position due to the persistent year-long net selling trend observed in gold exchange-traded funds (ETFs).

Illustration photo – Photo: Bloomberg.

Gold prices surged due to escalating concerns among investors about the potential spread of armed conflict in the Middle East following an attack on US soldiers in the region over the weekend. This development led to a 100,000 VND/tael increase in domestic gold bar prices this morning, January 30. However, the large gold fund SPDR Gold Trust continued to sell gold on the market, as investors awaited the outcomes of the US Federal Reserve (Fed) meeting.

At the close of Monday’s trading session in the US market, the spot gold price rose by 14 USD/oz, representing a nearly 0.7% increase compared to the previous week’s close, reaching 2,033.8 USD/oz. By 9:00 a.m. Vietnam time this morning, the spot gold price in the Asian market had decreased by 2.9 USD/oz compared to the New York session’s close, marking a 0.14% decrease and trading at 2,030.9 USD/oz.

The need for investors to hedge risks heightened following news of the attack on US soldiers in Jordan. A drone attack carried out by Iranian-backed rebels on Sunday resulted in the death of three US soldiers and injuries to at least 34 others in the border area between Jordan and Syria, as confirmed by the US State Department. This incident marked the first fatal attack on US forces in the Middle East since the Israel-Hamas conflict in the Gaza Strip last October.

Analyst Jim Wyckoff from the Kitco Metals precious metals news site commented, “This incident has elevated tensions in the Middle East, prompting the demand to buy gold and silver as a ‘safe haven.'”

The decline in US Treasury yields also contributed to the rise in gold prices, with the 10-year yield falling below the 4.1% mark. However, the strengthening USD continued to exert devaluation pressure on precious metals. The Dollar Index, measuring the greenback’s strength against a basket of six major currencies, closed Monday at 103.6 points, up from 103.5 points the previous week.

Investors exercised caution ahead of the Fed’s first regular monetary policy meeting of 2023, scheduled to conclude on Wednesday. The prevailing market sentiment suggests that the Fed is likely to maintain unchanged interest rates at this meeting, with a 97% probability according to CME’s FedWatch Tool.

Jim Wyckoff noted, “This Fed meeting will likely provide some signals about when interest rates will decrease and whether the Fed is leaning towards being tough or soft on monetary policy.”

A Reuters survey released on Monday indicated that experts anticipate global economic uncertainty and the Fed’s potential interest rate cuts will drive gold prices to new record highs this year.

World gold price developments over the past 10 years. Unit: USD/oz – Source: Trading Economics.

Nevertheless, gold prices currently encounter challenges, including the strengthening trend of the USD and revised expectations for the timing of the Fed’s initial interest rate cut, now postponed from March to May.

Furthermore, gold prices face a setback as gold exchange-traded funds (ETFs) persist in a year-long trend of net selling. The largest global gold ETF, SPDR Gold Trust, marked a net sale of over 1 ton of gold in Monday’s session, reducing its holding volume to less than 855 tons of gold. Last week, the fund recorded a net sale of 5 tons of gold.

As of 9:00 a.m., Phu Quy Group listed the price of SJC gold bars for the Hanoi market at 74.4 million VND/tael (buying) and 76.75 million VND/tael (selling). Compared to yesterday morning, SJC gold bars at this enterprise have seen a 100,000 VND/tael increase at both ends of the price.

The Phu Quy brand 999.9 plain round ring is now priced at 63.9 million VND/tael and 65 million VND/tael, witnessing an increase of 150,000 VND/tael at each price end.

In the Ho Chi Minh City market, SJC Company quoted the price of gold bars of the same brand at 74.3 million VND/tael (buying) and 76.8 million VND/tael (selling), an increase of 100,000 VND/tael compared to the morning rates.

Simultaneously, the converted world gold price is nearly 60.4 million VND/tael if converted at the USD selling rate at Vietcombank, remaining unchanged from yesterday morning. Although the world gold price has increased, the converted price has not risen due to the sharp decrease in the USD/VND exchange rate.

In comparison to the converted world gold price, the retail price of SJC gold bars is 16.4 million VND/tael higher, and the gold ring price is 4.6 million VND/tael higher.

Vietcombank quoted USD prices at 24,305 VND (buying) and 24,675 VND (selling) this morning, reflecting a decrease of 75 VND at each rate compared to yesterday morning.

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