Global gold prices surged during Friday’s trading session (May 17), approaching the record high set in April, as investors continued to bet on the Federal Reserve’s potential rate cuts this year. Domestically, gold bar prices surged past VND 90 million per tael on Saturday morning (May 18), while gold ring prices also saw a significant increase.
At the close of the US market, spot gold rose by $38.90/oz compared to the previous session’s close, equivalent to a gain of over 1.6%, reaching $2,415.30/oz, according to data from Kitco.com. Over a month ago, gold prices peaked at a historical high of over $2,430/oz.
In addition to the expectations of lower US interest rates, gold prices were also supported by China’s real estate stimulus package.
“Gold prices rose even as the US dollar index and US Treasury yields edged slightly higher during the session. I believe China’s plan to rescue its real estate sector also played a role in boosting gold prices,” said Bart Melek, head of commodity strategies at TD Securities, in an interview with CNBC.
On Friday, China unveiled its most aggressive effort to date to rescue its ailing property market. The support package includes easing mortgage lending rules and urging local governments to buy unsold homes with a fund of 300 billion yuan ($42 billion) from the country’s central bank.
With this increase, gold prices have now risen for two consecutive weeks, gaining 2%. The main driver for gold this week was the strengthened possibility of the Fed starting to cut rates in September, following weaker-than-expected US inflation data for April.
“Gold prices are reacting to the idea that inflation may be under control. The likelihood of the Fed keeping rates higher for longer is not as significant as before,” Melek added.
Traders are now leaning towards the possibility of the Fed beginning to cut rates in September, with two rate cuts expected this year, each by 0.25 percentage points. However, the outlook for Fed rates remains heavily dependent on upcoming US economic data.
The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, purchased 6.6 tons of gold this week, bringing its total holdings to 838.5 tons.
Domestically, at around 10:00 am on Saturday, Phu Quy Group listed gold bar prices in Hanoi at VND 87.8 million per tael for buyers and VND 90.1 million per tael for sellers, an increase of VND 400,000 and VND 600,000 per tael, respectively, compared to Friday afternoon.
The 99.99% pure gold rings were priced at VND 75.9 million per tael for buyers and VND 77.5 million per tael for sellers, an increase of VND 400,000 and VND 500,000 per tael, respectively.
At the same time, Bao Tin Minh Chau Company quoted the price of their Dragon Thang Long gold rings at VND 76.18 million per tael for buyers and VND 77.58 million per tael for sellers.
In Ho Chi Minh City, SJC Company quoted gold bar prices at VND 87.7 million per tael for buyers and VND 90.4 million per tael for sellers. SJC gold rings were priced at VND 75.6 million per tael for buyers and VND 77.2-77.3 million per tael for sellers, depending on the weight of the product.
The closing price of global gold on Friday corresponded to approximately VND 74 million per tael, an increase of VND 1.1 million per tael from the previous day. Thus, the retail gold bar price was VND 16 million per tael higher than the international price, while the gold ring price was VND 3.2-3.6 million per tael higher.
To address the significant gap between domestic and international gold prices, the State Bank of Vietnam announced on May 17 its decision to inspect the compliance with policies and laws in the gold business activities of credit institutions and gold business enterprises.
Regarding the effort to increase gold supply in the domestic market, from April 19, 2024, to date, the State Bank of Vietnam has held seven auctions of SJC gold bars, with a total volume of 27,200 taels of gold won, equivalent to approximately 1.02 tons. The State Bank of Vietnam plans to hold two more gold auctions on May 21 and May 23, 2024, with an auction volume of 16,800 taels each time.
This week, domestic gold bar prices fell by nearly VND 2 million per tael despite the strong increase in global prices.
The US dollar index rose slightly on Friday, reaching 104.5 points at the close. However, the index fell by nearly 0.8% over the week.
Vietcombank’s USD buying and selling rates at the week’s close were VND 25,220 and VND 25,450, respectively, an increase of VND 100 in the buying rate compared to Friday morning but unchanged in the selling rate. Compared to the previous week, the USD buying rate at this bank has increased by VND 66, while the selling rate has decreased by VND 34.
