Gold prices kicked off March with an explosive session, reaching the highest level in the past 2 months, as worse-than-expected US economic data increased expectations of the Federal Reserve (Fed) cutting interest rates in 2024. Domestic gold ring and bullion prices also soared this morning (March 2).
At the close of Friday’s session in the US market, spot gold prices rose $38.9/oz, equivalent to a 1.9% increase, reaching $2,083.3/oz – according to data from Kitco Exchange.
Converted at the selling rate of USD at Vietcombank, this price level is equivalent to nearly VND 62.3 million/tael, an increase of VND 1.2 million/tael compared to this morning.
The driving force behind this price increase of gold is the decline in US Treasury bond yields and the US dollar exchange rate after a series of worse-than-expected economic data.
Friday’s reports showed that manufacturing activity of factories in the US declined more deeply in February and the consumer confidence index according to the survey of the University of Michigan was also lower than the analysts’ forecast. These figures reinforce the possibility that the Fed will begin interest rate cuts in June.
Prior to this, some investors were concerned that if there were more better-than-expected US economic data, the Fed would postpone interest rate cuts for even longer. A higher interest rate environment for a longer period of time would be detrimental to the price of gold, an interest-free asset. Therefore, when the possibility of the Fed reducing interest rates in June is confirmed, investors in the gold market breathed a sigh of relief.
The chief strategist Bart Melek of TD Securities believes that gold prices are being supported by market sentiment that the Fed will begin to loosen monetary policy in mid-year – a move that will help reduce the opportunity cost of holding gold.
“In the next 3-4 months, gold prices will set a new record if economic data deteriorates and the market is convinced that the Fed is ready to cut interest rates,” Melek said, noting that the trend of central bank gold buying is also supporting gold prices.
After several days of net selling, the world’s largest gold exchange-traded fund (ETF) SPDR Gold Trust also resumed net buying in Friday’s session, but in small quantities. The gold holdings of the fund increased by 0.9 ton in this session, reaching nearly 823.8 tons of gold.
This week, SPDR sold 4 tons of gold, bringing the total net selling volume in 4 weeks to 28 tons of gold.
Analysts believe that gold prices are also being supported by concerns over the instability at New York Community Bancorp (NYCB), a US regional bank. After the market closed on Thursday, the bank announced a change in leadership and revealed that it is facing some internal control issues related to loan review. This is an escalating challenge at NYCB in the context of the bank facing increasing non-performing commercial real estate loans.
NYCB stocks “plummeted” nearly 26% in Friday’s session, raising the total decline since the beginning of the year to 65%, reflecting investors’ concerns that the issues at this bank are just the tip of the iceberg of a crisis related to real estate.
“Investors bought a lot of gold today due to weaker-than-expected economic data and slightly dovish statements from Fed officials. The news about NYCB also impacted the psychology of investors,” said precious metals analyst Tai Wong in New York.
Just after opening this morning, domestic bullion prices rose sharply to nearly VND 81 million/tael, while gold ring prices approached VND 68 million/tael.
At more than 9am, Phu Quy Group listed the price of Phu Quy 999.9 round gold rings for the Hanoi market at VND 66.5 million/tael (buy) and VND 67.7 million/tael (sell), respectively increasing VND 900,000/tael and VND 1 million/tael compared to the end of yesterday afternoon.
Bao Tin Minh Chau Company announced the price of Rong Thang Long round gold rings at VND 66.66 million/tael and VND 67.86 million/tael, respectively increasing VND 1.28 million/tael and VND 1.31 million/tael.
In Ho Chi Minh City market, SJC Company announced the price of gold rings under its brand at VND 65.2 million/tael (buy) and VND 66.4-66.5 million/tael (sell), depending on weight, increasing VND 950,000/tael at both ends of the price compared to this morning.
SJC gold bars in Hanoi market as quoted by Phu Quy currently have prices of VND 78.25 million/tael and VND 80.65 million/tael, respectively increasing VND 350,000/tael and VND 900,000/tael.
SJC Company announced the price of gold bars under its brand in Ho Chi Minh City market at VND 78.2 million/tael and VND 80.7 million/tael.
In addition to fluctuations in world gold prices, domestic gold prices are also being pushed up due to high gold demand amid limited supply. This week, SJC gold bars and round gold rings saw an increase of about VND 2.2 million/tael.
Compared to the converted world gold prices, retail SJC gold bars are currently more than VND 18.4 million/tael higher, while gold ring prices are more than VND 5.6 million/tael higher.
In the international market, the Dollar Index measuring the strength of the US dollar ended Friday’s session with a nearly 0.3% decrease, at 103.89 points.
