World Gold Prices Slide Amidst Rising Interest Rate Expectations
Global gold prices opened the new trading week with a significant dip this morning (April 22), pressured by concerns over a potential delay in the Federal Reserve’s interest rate cuts. In Vietnam, domestic gold prices fell by more than 1 million VND per tael compared to the weekend, with gold ring prices also dropping below the 77 million VND per tael mark.
At around 9:00 AM, spot gold prices in the Asian market stood at $2,375.2 per ounce, a decrease of $17 per ounce compared to the Friday close in the US, equivalent to a drop of over 0.7% – according to data from the Kitco exchange.
Converted using the USD selling rate at Vietcombank, this price is equivalent to approximately 72.9 million VND per tael, a decrease of 500,000 VND per tael compared to the weekend.
At the same time, Phu Quy Group listed the price of SJC gold bars for the Hanoi market at 80.3 million VND per tael (buy) and 82.8 million VND per tael (sell), a decrease of 1.7 million VND per tael in the buy price and a reduction of 1.2 million VND per tael in the sell price compared to Saturday morning.
The Phú Quý brand’s 999.9 pure gold rings were priced by Phu Quy at 75 million VND per tael and 76.7 million VND per tael, respectively, for the buy and sell prices, a decrease of 400,000 VND per tael at both ends of the price range.
Bao Tin Minh Chau Company quoted 999.9 pure gold rings with the Rong Thang Long brand at 75.08 million VND per tael and 76.78 million VND per tael.
In the Ho Chi Minh City market, SJC Company quoted gold bars of the same brand at 80.5 million VND per tael and 83 million VND per tael.
999.9 pure gold rings from SJC were being priced with a buy price of 74.3 million VND per tael and a sell price of 76.2-76.3 million VND per tael, depending on the weight of the product.
Domestic gold bar prices fell sharply, partly due to a global gold price decrease and partly due to the State Bank of Vietnam’s gold bar auction this morning to increase supply to the market. The auction is scheduled to take place at 10:00 AM at the State Treasury Foreign Exchange Reserve Management Department, with an auction volume of 16,800 taels of gold bars. The reference price for calculating the deposit value is 81.8 million VND per tael, according to the State Bank of Vietnam press release on April 19.
Compared to converted world gold prices, local SJC gold bar prices are approximately 10 million VND per tael higher, while gold ring prices are nearly 4 million VND per tael higher.
Global gold prices declined as geopolitical tensions in the Middle East showed signs of easing. Following Israel’s limited strike on Iran last Friday, Iran has given no indication that it will retaliate. The resulting slowdown in demand for gold as a geopolitical hedge removed a significant support for the precious metal’s price.
Additionally, gold prices continue to face downward pressure from the possibility of the Fed keeping interest rates higher for longer. Recent statistics indicating persistent inflation and steady US economic growth have caused the market to postpone its forecast for the Fed’s initial rate cut from June to September. Some experts even speculate that the Fed may hold off on rate cuts altogether this year.
“The issue between Iran and Israel is not having a major impact on gold at this moment. When Israel attacked the Iranian consulate, market participants had expected a strong reaction. But the response was quite low from both sides, and the market is not really concerned at this point. This has taken gold into a range-bound phase, with the bias more on the downside,” Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, told Kitco News on Friday.
According to Kitco News, some analysts believe that as geopolitical tensions wane, the market may start to focus on fundamental economic factors, and this does not bode well for gold in the short term, as downward pressure on gold prices will stem from the prospect of higher interest rates for longer, coupled with the uptrend in US Treasury yields and the USD exchange rate.
The Dollar Index has been holding steady around the 106 mark in recent days, its highest level in five months.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that “the market could be in for a rude awakening as the dollar and yields are pressing higher, and the prospect of a near-term rate cut by the Fed has all but evaporated” – factors that are detrimental to gold prices.
Technically, according to FXTM’s Head of Research, Lukman Otunuga, gold prices need to stay above $2,355 per ounce to continue their ascent towards the $2,400 per ounce mark and beyond. Conversely, a drop below $2,355 per ounce could push gold prices down to $2,320 per ounce and $2,300 per ounce.
This week, two key US economic figures will be released which could significantly impact Fed rate prospects and gold prices. These figures include the first quarter GDP report on Thursday and the Personal Consumption Expenditure (PCE) index – the Fed’s preferred measure of inflation – on Friday.
Vietcombank quoted the USD this morning at 25,145 VND (buy) and 25,485 VND (sell), an increase of 12 VND at both ends of the price range compared to the previous week’s close.
