Gold prices fell in Thursday’s session after US unemployment data showed a still strong economy – a data point that reinforces the possibility of the Federal Reserve (Fed) keeping interest rates higher for longer. Pessimism about the outlook for gold, the world’s largest gold ETF, SPDR Gold Trust, continues to sell off.
This morning (February 23), the gold price rose sharply to nearly 79 million dong per tael from below 78 million dong per tael yesterday morning, widening the difference compared to the converted international price.
At the close of the overnight session, spot gold in New York fell $1.4/oz from the previous session to $2,025.3/oz, according to data from Kitco. During the session, gold prices reached over $2,035/oz, the highest in nearly 2 weeks.
Weekly reports from the US Department of Labor showed a surprising drop in first-time jobless claims in the country – a sign that job growth could still remain strong in February. In the reporting week, the US had 210,000 initial jobless claims, a decrease of 12,000 people from the previous week.
A tightening labor market implies that the economy will continue to maintain strong growth and inflation may decrease slowly. In that context, the Fed may not reduce interest rates as early and as fast as expected.
This potential raises the yield on US Treasury bonds, putting pressure on the price of gold – an asset that does not earn interest. In addition, the prospect of the Fed maintaining higher interest rates for longer also disadvantages gold prices.
“We believe that the price of gold in the short term will maintain the current range, and downward pressure on gold prices in the short term will be greater than the ability of gold prices to rise” if the US economy continues to release positive data and inflation does not decrease further – the chairman of global markets at EverBank, Chris Gaffney, commented.
On Wednesday, the Fed released the minutes of its January monetary policy meeting, showing that the central bank’s policy makers do not want to cut interest rates too soon.
On Thursday, the market is betting with a 66% chance that the Fed will start lowering interest rates in June – according to data from the CME’s FedWatch Tool, down from nearly 80% last week.
However, the decline in the USD in recent sessions is a supporting factor for gold prices. The Dollar Index, measuring the strength of the USD against a basket of 6 other major currencies, closed Thursday’s session at just below 104 points, slightly lower than the previous session. Over the past 5 sessions, this index has fallen nearly 0.4% – according to data from MarketWatch.
In addition, political tensions in the Middle East are also supporting factors for gold prices. According to Gaffney, the demand for gold as a hedge against risk and technical charts show that gold prices are strongly supported around $2,000/oz.
According to Daniel Ghali, strategist at TD Securities, investors are reducing expectations of a Fed rate cut cycle, but “we still expect gold prices to increase significantly in the second quarter of this year”.
However, many investors still show pessimism, as evidenced by the continuous net selling trend of the world’s largest gold ETF, the SPDR Gold Trust.
In Thursday’s session, the fund sold an additional 2 tons of gold, reducing its holding volume to 827.8 tons of gold. This week, the fund has dumped about 10 tons of gold, after net selling 14 tons of gold in the previous 2 weeks.
At nearly 9 a.m. Vietnam time, spot gold in the Asian market stood at $2,027/oz, up $1.7/oz from the overnight session in New York, according to Kitco.
This price is equivalent to about 60.5 million dong per tael if converted at the USD selling rate at Vietcombank, up 200,000 dong per tael from yesterday morning.
World gold prices are mainly increasing due to the strong rise in the USD/VND exchange rate. Vietcombank early this morning quoted the USD at 24,390 dong (buying) and 24,760 dong (selling), up 60 dong at each end compared to yesterday morning.
At the same time, Bao Tin Minh Chau Company listed SJC gold bars for the Hanoi market at 76.9 million dong per tael (buying) and 78.9 million dong per tael (selling), respectively increasing 900,000 dong per tael and 1 million dong per tael compared to yesterday morning. However, compared to the end of yesterday afternoon, the SJC gold bar price at this company is now up 300,000 dong per tael.
Round SJC gold rings 999.9 Rong Thang Long of Bao Tin Minh Chau Company have prices of 64.54 million dong per tael and 65.64 million dong per tael, respectively increasing 170,000 dong per tael at each end compared to yesterday morning.
In the Ho Chi Minh City market, SJC Company quoted gold bars with the same brand at 76.8 million dong per tael and 79 million dong per tael, respectively increasing 1.1 million dong per tael at each end compared to yesterday morning.
Compared to converted world gold prices, retail gold prices currently exceed 18.5 million dong per tael, up from 17.6 million dong per tael yesterday morning. Gold ring prices varied from 4.3-5.1 million dong per tael.
