Gold Prices Rise as Geopolitical Risk Demand Returns
Gold prices moved higher on Friday, April 19, as an Israeli airstrike on Iran once again fanned geopolitical risk appetite. The rise marked a fifth consecutive weekly gain, even as the prospect of higher interest rates for longer capped gains.
Domestically, gold prices were stable, with bullion trading at around 84 million dong/tael and tael bars at 77 million dong/tael.
At the close of trading in New York, spot gold rose $13.3/oz, or 0.56%, to $2,392.2/oz. During the session, gold briefly touched $2,420/oz after news of Israel’s retaliatory strike on Iran. However, as investors perceived the attack as a carefully calibrated move to avoid escalation, gold pared gains.
For the week, gold gained 2.2%, marking its fifth straight weekly advance. The rally was driven by safe-haven demand for gold amid geopolitical risks and continued net purchases of bullion by central banks for their reserves.
Israel’s strike on an Iranian consulate in Syria earlier this month prompted retaliatory Iranian strikes on Israel, followed by another Israeli strike on Iran on April 19. The tit-for-tat attacks raised concerns about a broader conflict in the Middle East. However, Tehran has not signaled it will respond further to the April 19 attack.
According to James Stavridis, former NATO Supreme Allied Commander, Israel’s April 19 strike was “very limited and very calibrated.” “Both the Israelis and the Iranians are downplaying the significance of this event, which is a sign of de-escalation,” Stavridis told CNBC.
“The de-escalation/escalation dynamic in the Middle East is dominating gold. If we do get de-escalation, you’ve got to take some of the risk premium out of gold, because that safe-haven demand would abate,” David Meger, director of metal trading at High Ridge Futures, told Reuters.
“But the longer-term trend in gold should remain supportive, because the Fed is going to cut eventually, even if it’s a little later than we thought,” Meger said.
Gold is struggling to break above $2,400/oz as it grapples with downward pressure from the prospect of higher Fed rates for an extended period. Fed officials have recently doubled down on their signal that they are in no rush to cut rates with inflation running hot. Markets currently price in a 67% chance of the Fed starting to cut rates in September. There are even some bets that the Fed will not cut rates at all this year.
The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, added 4.3 tonnes of gold to its holdings on Wednesday, lifting its total holdings to 831.9 tonnes.
The dollar index ended the week up around 106.1, marking a weekly gain of almost 0.1% and a monthly increase of 1.6% amid expectations that interest rates will remain elevated for longer.
In Vietnam, at around 10 am today (April 20), Phu Quy Group listed the price of SJC gold bars for the Hanoi market at 82 million dong/tael (buy) and 84 million dong/tael (sell), down 100,000 dong/tael at both ends of the price range compared to the same time yesterday morning.
Phu Quy quoted the price of 999.9 Phu Quy plain rings at 75.4 million dong/tael and 77.1 million dong/tael for buying and selling, respectively, up 100,000 dong/tael at both ends of the price range.
In the Ho Chi Minh City market, SJC Company listed the price of gold bars under the same brand at 82 million dong/tael and 84 million dong/tael.
Plain 999.9 SJC round rings were quoted at 74.8 million dong/tael for buying and 76.7-76.8 million dong/tael for selling, depending on the weight of the product.
The exchange rate of the US dollar at Vietcombank was listed at the end of the week at 25,133 dong (buying) and 25,473 dong (selling), with the buying price increasing by 30 dong but the selling price remaining unchanged compared to yesterday morning. This week, the USD price at Vietcombank increased by 323 dong for buying and 293 dong for selling.
At the selling exchange rate of the US dollar above, the price of gold is currently equivalent to approximately 73.4 million dong/tael.
At a press conference on April 19, the governor of the State Bank said the central bank is implementing measures to support the gold market, selling gold bars to increase the supply of gold to the market through tenders. The State Bank is also currently rushing to revise Decree 24 to manage the gold market in line with the overall development of the economy after 12 years of implementation.
The State Bank also said it would send a notice to 15 qualified credit institutions and enterprises to bid for gold on the afternoon of April 19, which will be implemented as early as Monday next week, April 22.
