The global gold price ended the session on Friday in a bullish state, completing a significant week of gains due to a weaker US dollar and risk aversion amid escalating geopolitical tensions in the Middle East. Notably, the increase in gold prices this week occurred even as the Federal Reserve pushed back expectations of an early interest rate cut this year.
Domestically this morning (February 24), the gold bullion price dropped below the threshold of VND 79 million per tael, while the selling price of gold rings remained relatively stable in the price range of VND 64.5-65.5 million per tael, depending on the brand.
Closing the session in New York market, spot gold prices rose $11.1 per ounce, equivalent to a 0.55% increase, closing at $2,036.3 per ounce – according to data from Kitco exchange. Throughout the week, gold prices increased by 1.4%.
Gold prices rose as the Dollar Index, which measures the strength of the US dollar against a basket of 6 other major currencies, decreased by more than 0.3% this week, closing the week below the 104-point threshold – according to data from MarketWatch. This is the first week of decline for the greenback after nearly 2 consecutive months of increase due to investors’ expectation that the Fed will postpone interest rate hikes.
This week, expectations of the timing of the Fed’s first interest rate cut have pushed back to essentially June, but the US dollar has still declined, paving the way for gold prices to rise.
However, gold prices are still facing downward pressure from the possibility that the Fed may keep interest rates higher for longer. The basis for such interest rate expectations is the firm stance of Federal Reserve officials and data showing that the US economy maintains strong growth momentum and inflation is decreasing at a slower rate than expected.
Friday’s data release showed accelerated growth in the US service sector in January, with new orders and employment in this sector both increasing. Good news about the economy also means that the Fed is likely to have difficulty reducing interest rates quickly and significantly in the coming year.
Data from the FedWatch Tool of the CME Exchange shows that the probability of the Fed starting interest rate cuts in June is nearly 53%, down from 66% in the previous session. Earlier this month, the market still believed that the possibility of the Fed implementing the first interest rate cut in March was 62%. In addition, instead of expecting that the Fed will have 6 interest rate cuts this year as initially expected, investors now believe that the Fed will only cut interest rates 4 times throughout the year.
On Thursday, Federal Reserve Governor Christopher Waller said he was “not in a hurry” to cut interest rates. The minutes of the Fed’s January meeting, released this week, also indicated that Fed officials do not want to cut interest rates too early or too quickly.
Gold is an interest-free asset, so a longer period of higher interest rates is not beneficial to gold prices.
“The gold price rose because the US dollar weakened,” said Bob Haberkorn, strategist at RJO Futures, about the price increase of gold on Friday and this week. Haberkorn emphasized that the precious metals market is facing downward pressure, but thanks to risk aversion, gold managed to maintain the $2,000/oz price range.
In addition to the interest rate risk, gold prices also face downward pressure from continued net selling of gold exchange-traded funds (ETFs). This week, the world’s largest gold ETF – SPDR Gold Trust – net sold 10 tons of gold, reducing its holdings to 827.8 tons of gold. In the past 3 weeks, the fund has sold 24 tons of gold.
According to some experts, investors are losing interest in gold ETFs and instead redirecting capital into newly established Bitcoin ETFs in the US.
Early this morning, the domestic gold bullion price decreased by VND 300,000-600,000 per tael compared to yesterday morning, depending on the listing of each business. However, compared to the previous week, the gold bullion price increased by an average of VND 100,000 per tael.
In the Hanoi market at nearly 9am, Phu Quy Group listed the buying price of SJC gold bullion at VND 76.5 million per tael and the selling price at VND 78.5 million per tael. In HCMC, PNJ Company quoted the buying price of SJC gold bullion at VND 76.5 million per tael and the selling price at VND 78.7 million per tael.
Round, smooth 999.9 gold rings have different prices of up to several million VND per tael among different jewelry companies.
Phu Quy rings are priced at VND 64.4 million per tael (buying) and VND 65.5 million per tael (selling). Meanwhile, PNJ rings are priced at VND 63.4 million per tael and VND 64.5 million per tael, respectively.
With this selling rate, the equivalent world gold price at the end of the week is VND 60.8 million per tael, lower than the retail selling price of SJC gold at VND 17.7-17.9 million per tael, and lower than the retail selling price of gold rings at VND 3.7-4.7 million per tael.
