Expert Warning: “Never Borrow Money to Buy Gold”

As of noon on December 24th, the SJC gold bar price was listed by businesses at VND 157.2 million per tael for buying and VND 159.2 million per tael for selling, marking an all-time high.

The price of 99.99% gold rings and jewelry also reached new peaks, with buying at VND 152.6 million per tael and selling at VND 155.6 million per tael.

A reporter from Nguoi Lao Dong Newspaper discussed with financial expert Phan Dung Khanh the factors driving the continuous rise in gold prices over recent times.

Reporter: By this morning, the global gold price had surpassed $4,500 per ounce, pushing domestic gold prices to new highs. What factors are supporting this strong upward trend in the precious metal?

– Mr. Phan Dung Khanh: The strong rise in gold prices is not just a short-term phenomenon but part of a trend that has persisted for over two decades. In 2024 alone, gold prices have increased by approximately 50%, and this year, the trend is even more pronounced.

As of now, the global gold price has exceeded $4,500 per ounce, up roughly 70% since the beginning of the year—a figure rarely seen in the history of the gold market.

Alongside familiar factors such as prolonged geopolitical tensions, particularly the Russia-Ukraine conflict and other global hotspots, the gold market has recently been influenced by new factors, some of which were not anticipated by major financial institutions.

Firstly, there’s the gold-buying activity of central banks. After a slowdown in late last year and early this year, which led many to predict a potential price correction, central banks have resumed strong net purchases in recent months, according to data from the World Gold Council (WGC).

Notably, not only major central banks but also smaller ones—which previously participated minimally—are increasing their gold reserves. This is a critical support factor for gold prices.

Secondly, and more unexpectedly, new private organizations with substantial buying power have entered the market. A prime example is companies operating in the digital asset and stablecoin sectors, such as Tether.

These entities are becoming the largest physical gold buyers in the private sector, with their purchasing power occasionally surpassing that of central banks. This new influx of capital has increased demand in the gold market, a factor largely overlooked in previous analyses.

Do you think gold prices will continue to rise?

– Another emerging trend supporting gold prices is the digitization of gold. Some international financial institutions are beginning to issue digital gold products, requiring them to back these products with physical gold.

While the current scale is not yet significant, this could be a medium- to long-term trend, further injecting capital into the gold market in the coming years.

Gold is primarily priced in USD, making it highly sensitive to the policies of the U.S. Federal Reserve (FED). Despite a period of cooling global inflation, it is now on the rise again.

In this context, the FED remains under pressure to maintain a loose monetary policy, even as inflation risks creeping up. This heightened concern about future inflation continues to support gold prices.

Conversely, is there a risk of a gold price crash after such a prolonged rally, potentially leading to a “bubble”?

– Absolutely! No asset can rise indefinitely. Gold prices could reverse if central banks or major gold-buying organizations suddenly reduce or halt their purchases.

If U.S. inflation surges, forcing the FED to tighten monetary policy, the upward trend in gold prices would also be affected. Additionally, capital could shift from gold to other investment channels.

While gold has consistently hit new highs for years, silver—another safe-haven asset—only recently surpassed its decade-long peak, outpacing gold’s growth rate. Similarly, stock markets and real estate in many countries are setting new records, potentially diverting capital from gold.

For SJC gold bars and gold rings, what factors could cool or even reduce their prices?

– Domestic gold prices are influenced by global prices. If global gold prices decline, SJC gold bars and gold rings will follow suit.

Additionally, domestic gold market regulations, particularly efforts to increase supply and eliminate the SJC gold bar monopoly as commercial banks and licensed enterprises enter the market, could narrow the gap between domestic and global gold prices.

As this gap diminishes, SJC gold bar prices could adjust downward from their current peaks, posing risks for short-term investors who purchased gold at high prices.