Global gold prices fell on Friday (Sep 27) due to profit-taking pressure, but are on track to complete their strongest quarterly gain in eight years, boosted by expectations of falling interest rates globally, especially the shift in monetary policy in the US.
At the close of trading, the spot gold price in New York fell by $15.6/oz compared to the previous session’s close, equivalent to a 0.58% decrease, to $2,658.9/oz, according to data from the Kitco exchange.
When converted using Vietcombank’s selling exchange rate, this price is equivalent to VND 79.3 million/lotte, a decrease of VND 500,000/lotte compared to yesterday morning. For the week, global gold prices in VND terms increased by VND 1.1 million/lotte.
Global gold prices have continuously broken records in the first four trading sessions of this week. The all-time peak for spot gold was $2,685.42/oz, recorded on Thursday.
In the third quarter, gold prices rose by 14%, the strongest quarterly increase since the first quarter of 2016. So far this year, gold prices have climbed by 29%, the most substantial yearly increase in the past 14 years.
On the last trading day of the week, investors received positive inflation data, which could provide further rationale for the US Federal Reserve (Fed) to continue cutting interest rates. A report from the US Department of Commerce showed that the Personal Consumption Expenditures Price Index (PCE) – the Fed’s preferred inflation measure – rose by 0.1% in August, in line with economists’ forecasts in a Dow Jones poll. Compared to the previous year, PCE increased by 2.2%, slightly lower than the projected 2.3%.
After the report was released, the market slightly increased its bets on the likelihood of the Fed continuing to aggressively cut rates at its November meeting. According to data from the FedWatch Tool of the CME exchange, traders are wagering on a more than 54% chance that the Fed will opt for a 0.5 percentage point cut at its next meeting, with almost 46% betting on a 0.25 percentage point reduction.
However, gold prices dipped as several investors locked in profits at record highs.
Nonetheless, some organizations and experts predict that gold prices could reach the $3,000/oz mark in the near future.
“The $3,000/oz mark is well within reach this year. There are numerous factors that could fuel the gold market,” said Phillip Streible, Chief Strategist at Blue Line Futures.
“Peace negotiations in the Middle East could break down, the US job market could continue to weaken, the Fed could cut rates by 0.5 percentage points again, and China could ramp up stimulus measures,” added Streible, noting that these factors could propel gold prices higher.
Soaring gold prices are dampening physical gold demand in China and India, the world’s top two gold consumers. Many consumers in these two countries have been selling gold instead of buying it this week, according to Reuters.
Meanwhile, exchange-traded funds (ETFs) – a pillar of demand – only made minor net purchases last week and have not significantly contributed to the upward trend in gold prices. Nevertheless, analysts predict that these funds will buy more gold in the coming months. The world’s largest gold ETF, SPDR Gold Trust, currently holds nearly 872 tons of gold, according to the fund’s website.
“Speculation, especially in the gold futures market, has driven this gold rally. But for prices to climb higher, there needs to be greater interest from Western investors. The slight net buying from ETFs is a good start,” commented John Reade, Strategist at the World Gold Council (WGC)
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