Global Gold Prices Fall After US Inflation Data, Domestic Market Slows

"I anticipate that the price of gold will continue to face downward pressure due to the strong economic data coming out of the US and a robust job market," commented an expert.


Gold prices fell sharply in overnight trading as another report showed that inflation in the U.S. is slowing more than expected – a data point that increases the likelihood of the Federal Reserve postponing interest rate cuts. Gold prices in the country this morning (March 15) have generally remained stable compared to the late afternoon yesterday, holding above VND 81 million/tael for gold bars and around VND 69.5 million/tael for gold rings.

At nearly 10 a.m. today, Phu Quy Group listed SJC gold bars for the Hanoi market at VND 79.5 million/tael (buying) and VND 81.3 million/tael (selling). Phu Quy’s round and smooth 999.9 gold rings are priced at VND 68.2 million/tael and VND 69.5 million/tael, respectively for buying and selling.

Bao Tin Minh Chau Company quotes its Dragon Thang Long 999.9 gold rings at VND 68.12 million/tael and VND 69.42 million/tael.

In Ho Chi Minh City market, SJC Company quotes gold bars of the same brand at VND 79.3 million/tael and VND 81.3 million/tael.

SJC round rings are priced at VND 67.7 million/tael (buying) and VND 68.95-69.05 million/tael (selling) depending on the weight of the product.

Domestic gold prices have experienced complex fluctuations in recent days, at times dropping by VND 2.5 million/tael from the record high of over VND 82 million/tael for gold bars and over VND 71 million/tael for gold rings set earlier this week. On Thursday, SJC gold bars for retail remained around VND 81 million/tael, while gold ring prices ranged from VND 69.5-70 million/tael.

In addition to the impact of international gold prices, domestic gold prices are also influenced by the supply-demand balance in the market at different times. When gold selling in the country increases, domestic gold prices may decrease more quickly than international prices. On the other hand, when demand rises, domestic gold prices may increase more rapidly than world prices – some gold traders explained.

However, fundamentally, domestic gold prices are currently facing downward pressure from international gold prices.

Yesterday’s session in the U.S. market saw spot gold prices drop $12/oz, equivalent to more than 0.5%, closing at $2,162.6/oz. At nearly 10 a.m. today, Vietnam time, spot gold prices in the Asian market fell another $0.6/oz compared to the close of the U.S. session, to $2,162/oz – according to data from Kitco exchange.

This price level is equivalent to about VND 64.8 million/tael if converted at the selling exchange rate of USD at Vietcombank.

This decline in prices brings world gold prices even deeper below the record high of nearly $2,200/oz set earlier this week. Putting downward pressure on the precious metal’s price is an economic report showing hotter inflation than expected in the U.S. These figures raise the possibility that the Fed will keep interest rates higher for longer – an environment that is not conducive to a non-interest-bearing asset like gold.

World gold price movement in the past month. Unit: USD/oz – Source: TradingView.

A report from the U.S. Department of Labor showed that the Producer Price Index (PPI) – a measure of wholesale commodity prices from manufacturing companies – exceeded expectations in February. Specifically, the overall PPI increased 0.6% compared to the previous month, twice as much as the expected increase of 0.3% from an economist survey by Dow Jones. The core PPI – an index that excludes food and energy groups – rose 0.3%, also higher than the forecasted increase of 0.2%.

Before the PPI report, the Consumer Price Index (CPI) report released by the U.S. Department of Labor on Tuesday also showed slower-than-expected inflation.

Yield on U.S. Treasury bonds and the USD exchange rate both increased after the PPI report, pulling gold prices down.

The 10-year Treasury bond yield increased by about 10 basis points to 4.29%, the highest in more than 1 week. The Dollar Index, measuring the strength of the USD, closed the session up 0.6%, reaching nearly 103.4 points from the previous session’s level of 102.8 points.

“I predict that gold prices will continue to face downward pressure because U.S. economic data shows that the economy remains strong and the job market remains strong. Investors are really asking the question of how quickly the Fed will decide to lower interest rates,” said Chris Gaffney, chairman of EverBank Investment Bank.

According to data from the CME exchange’s FedWatch Tool, traders are currently betting with a 59.9% probability that the Fed will start cutting interest rates in June. A week ago, the betting rate was 81.7%.

In terms of the Fed’s monetary policy meeting next week, the market forecasts the interest rate to remain unchanged. Instead, the focus will be on the Fed’s updated economic report, including forecasts for growth, unemployment, inflation and interest rates.

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