The world gold price was pinned below the key threshold of $2,000/oz in the Wednesday session (February 14), after a sharp decline the day before due to higher-than-expected US inflation figures which increased bets that the Federal Reserve (Fed) will keep interest rates higher for longer. In Vietnam, the price of gold per tael during the Lunar New Year was at 78 million dong/tael, higher than the international gold price converted to about 19 million dong/tael.
At closing on the night trading session in New York, the spot gold price fell $0.5/oz to $1,993/oz. On Tuesday, the world gold price fell $27/oz, equivalent to a decrease of about 1.3%.
“The gold price is cooling down due to the heat from CPI data. In the short term, it is difficult for the gold price to increase because the increase above the $2,000/oz level is mainly due to expectations that the Fed will reduce interest rates soon and more,” said Bob Haberkorn, a senior strategist at RJO Futures, to Reuters.
A report from the US Department of Labor on Tuesday showed that the Consumer Price Index (CPI) in January increased 0.3% compared to the previous month and increased 3.1% compared to the same period last year. In a previous survey by Dow Jones, economists forecasted a monthly increase of 0.2% and an annual increase of 2.9%.
According to data from CME’s FedWatch Tool, traders are placing bets that there is a 78.5% chance the Fed will start cutting interest rates in June. Meanwhile, the likelihood of the Fed cutting interest rates from May has dropped to only 38.5%, from 63.7% a week ago. The possibility of the Fed cutting interest rates from March is almost gone.
In addition, the market also believes that the Fed can only cut interest rates 2-3 times this year, instead of the 5-6 times expected at the beginning of the year.
Gold is an asset that does not yield interest, so an environment with higher interest rates for a longer time is not beneficial for the gold price.
In a Wednesday statement, Austan Goolsbee, President of the Chicago Fed, said that inflation will continue to decrease to the Fed’s target of 2% even if inflation data in the coming months may be slightly higher than expected. He also said that the Fed should be cautious about waiting too long before starting to cut interest rates.
Goolsbee’s cautious statement caused US treasury bond yields and the USD exchange rate to decrease after reaching a high point, thereby reducing downward pressure on gold and preventing a sharper decline in the price of the precious metal.
The 10-year US treasury bond yield decreased by 5 basis points to 4.267%, after reaching 4.332% in the session – the highest level since December 1st.
The Dollar Index, which measures the strength of the USD against a basket of 6 major currencies, closed at 104.72 points, a decrease of 0.13%, after reaching a 3-month high in the previous session.
Haberkorn believes that if there is further confirmation that the Fed cannot cut interest rates soon, the gold price may even decrease significantly.
Thursday, the market will pay attention to the retail sales revenue report for January, and on Friday, another inflation report, the Producer Price Index (PPI) will be released. These data will continue to shape investor expectations on the Fed’s interest rates, thereby affecting the gold price.
The world’s largest gold exchange-traded fund (ETF), SPDR Gold Trust, continued to sell off in the Wednesday session, with net sales volume of about 1.5 tons of gold, reducing holdings to over 839 tons. On Tuesday, the fund also sold off 1.5 tons of gold. Last week, the fund sold off about 10 tons of gold, maintaining a net selling trend so far this year.
In Vietnam, many gold businesses have reopened this morning after more than 1 week of Lunar New Year break. This is the time when experts predict that the domestic gold market will be “hotter” than usual due to the surge in lucky gold buying activities of people, pushing up demand force significantly during the VÃa Thần Tà i 10/1 Lunar New Year ceremony.
Early in the morning, the SJC gold price dropped by 700,000-800,000 dong compared to before the Lunar New Year, although the buying price was nearly unchanged. The price of gold rings remained almost unchanged compared to before the Lunar New Year at both ends of the price.
At nearly 9 a.m., Phu Quy Group listed the SJC gold price for the Hanoi market at 76.45 million dong/tael (buying) and 78.15 million dong/tael (selling). Phu Quy’s plain round ring 999.9 has a price of 64.5 million dong/tael and 65.7 million dong/tael, corresponding to the buying and selling prices.
At the same time, the spot gold price in the Asian market stood at $1,994.1/oz, up $1.1/oz compared to the closing of the previous session in the US. This price is equivalent to about 59 million dong/tael if converted at the USD selling rate at Vietcombank.
Compared to the converted world gold price, the retail SJC gold price is currently more than 19 million dong/tael higher, while the gold ring price is higher by about 6.7 million dong/tael.
