Global Gold Prices Under Pressure, Trading $19 Million Lower Than Domestic Rates


Global Gold Prices Under Pressure, Trading $19 Million Lower Than Domestic Rates

Illustration photo – Photo: Bloomberg.

World gold prices dipped below the significant $2,000/oz mark in the trading session on Wednesday (February 14), following a sharp decline the previous day. The hotter-than-expected US inflation data raised expectations that the Federal Reserve (Fed) would keep interest rates higher for a more extended period. Meanwhile, domestically, the price of gold bars is at 78 million VND/tael, approximately 19 million VND/tael higher than the international gold price.

By the end of the last night’s trading session in New York, the spot gold price had declined by 0.5 USD/oz, settling at 1,993 USD/oz. On Tuesday, global gold prices had fallen by 27 USD/oz, a decrease of about 1.3%.

“Gold prices are falling under the heat of CPI data. In the immediate future, gold prices are unlikely to increase because the surpassing of the 2,000 USD/oz mark is mainly due to the expectation that the Fed will reduce interest rates soon and significantly,” commented Bob Haberkorn, a senior strategist at RJO Futures, to Reuters news agency.

The US Department of Labor’s report on Tuesday revealed that the consumer price index (CPI) in January increased by 0.3% from the previous month and 3.1% from the same period last year. Dow Jones had previously forecast a monthly increase of 0.2% and a yearly increase of 2.9%.

Traders, based on data from CME’s FedWatch Tool, are now betting with a 78.5% chance that the Fed will begin cutting interest rates in June. In contrast, the probability of the Fed reducing interest rates starting on May 5 has decreased to only 38.5%, down from 63.7% a week ago. The possibility of a Fed rate cut in March is almost non-existent.

Additionally, market sentiment leans towards the belief that the Fed will only reduce interest rates 2-3 times this year, as opposed to the earlier expectation of 5-6 times. The prolonged higher interest rate environment is not advantageous for gold prices, as gold is a non-interest-bearing asset.

Chicago Fed President Austan Goolsbee’s comments on Wednesday, indicating that inflation would continue to fall toward the Fed’s 2% target, somewhat eased the pressure on gold prices. Goolsbee also emphasized that the Fed should exercise caution about waiting too long before initiating interest rate cuts.

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

Further confirmation that the Fed cannot cut interest rates in the near term could drive gold prices even lower, according to Mr. Haberkorn.

On Thursday, investors will closely monitor the January retail sales report, followed by the release of another inflation report, the producer price index (PPI), on Friday. These data points will continue to shape expectations regarding Fed interest rates, thereby influencing gold prices.

The world’s largest gold exchange-traded fund (ETF), SPDR Gold Trust, continued its net selling trend on Wednesday, with a net sale of about 1.5 tons of gold, reducing its holdings to over 839 tons of gold. This year, the fund has maintained a net selling trend, with net sales totaling about 10 tons of gold last week.

Domestically, many jewelry businesses resumed operations this morning after more than a week of the Tet holiday. This period is expected to see increased activity in the domestic gold market as people purchase gold for good luck, especially with the approach of the God of Wealth Day on January 10 of the lunar calendar.

In the early morning, the retail price of SJC gold bars dropped by 700,000-800,000 VND compared to pre-Tet levels, even though the buying price remained nearly flat. The price of gold rings was almost unchanged at both ends compared to pre-Tet levels.

Around 9 a.m., Phu Quy Group listed the price of SJC gold bars for the Hanoi market at 76.45 million VND/tael (buying) and 78.15 million VND/tael (selling). Phu Quy brand 999.9 plain round rings cost 64.5 million VND/tael and 65.7 million VND/tael for buying and selling, respectively.

At the same time, the spot price of gold in the Asian market stood at 1,994.1 USD/oz, up 1.1 USD/oz compared to the previous night’s closing session in the US. This price is equivalent to about 59 million VND/tael when converted at the USD selling rate at Vietcombank.

Compared to the converted world gold price, the retail price of SJC gold bars is over 19 million VND/tael higher, while the price of gold rings is about 6.7 million VND/tael higher.

Vietcombank quoted USD at 24,200 VND (buying) and 24,570 VND (selling) early in the morning.

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