Gold prices plunged on Friday (July 19) in New York, as a stronger US dollar and profit-taking by investors weighed on the precious metal. This came after gold prices soared to record highs earlier in the week.
At the close of trading, spot gold fell by $43.70 or 1.79% to $2,401.80 per ounce, according to data from Kitco. This equates to nearly VND 73.7 million per tael, a decrease of VND 300,000 from a week ago and VND 600,000 from yesterday morning.
Over a two-day period, gold prices dropped by VND 1.9 million, erasing the gains made in the previous two days.
During Friday’s session, spot gold briefly dipped below the $2,400 per ounce mark, and gold futures closed below this key level.
The record high for spot gold was set on Wednesday at over $2,482 per ounce.
The US Dollar Index, which measures the greenback’s strength against a basket of six major currencies, ended the week at 104.37, up 0.18% on Friday and 0.26% for the week.
Rising US Treasury yields also added downward pressure on gold prices. The yield on the 10-year note climbed 5.4 basis points to close at 4.242%.
“In addition to profit-taking, gold prices are falling because the soft landing scenario for the US economy could become a reality,” said Alex Ebkarian, COO of Allegiance Gold, in a statement to Reuters. “A soft landing would encourage investors to shift their capital from safe-haven assets like gold to riskier assets.”
“We’re seeing more and more investment decisions that require gold prices to rise further,” Ebkarian added.
According to the FedWatch Tool from CME Group, there is a 92.6% chance that the Fed will cut interest rates at its September meeting. Earlier in the week, this probability climbed to nearly 100%.
Earlier in the week, Fed Chair Jerome Powell stated that recent data “bolsters the view that inflation will gradually return to our 2% target.” However, stronger-than-expected US employment and manufacturing data released later in the week pushed the dollar higher and reduced expectations for a rate cut in September.
Gold exchange-traded funds (ETFs) saw strong buying this week. SPDR Gold Trust, for example, purchased approximately five tons of gold, increasing its holdings to over 840 tons.
“If ETFs buy more gold as interest rates fall, gold prices will rise significantly,” said Chris Mancini, a portfolio manager at Gabelli Gold Fund. “If the US economy weakens and the government is forced to stimulate demand, especially by investing in infrastructure, both gold and industrial metals are likely to rise.”
According to Reuters, physical gold demand in Asia was subdued this week as buyers were hesitant at record-high prices. Instead, many consumers and investors in major gold markets like China and India took advantage of the high prices to sell their gold.
For the week, spot gold prices fell by $9.80 or 0.4%.
In an interview with Kitco News, James Stanley, a strategist at Forex.com, commented that the sharp decline in gold prices after reaching record highs earlier in the week was justified, as the market had become overbought. He identified $2,500 per ounce as another key psychological level for gold at this point.
“The question now is whether the $2,400 per ounce level can hold. We don’t have enough information to conclude that. If this level holds, the strong upward trend in gold prices will continue. I remain optimistic about gold due to the strong underlying supportive factors,” Stanley stated.
According to the strategist, a downward trend in gold prices would only form if gold breaks below the key support level of $2,300 per ounce.
In contrast, a report from TD Securities predicted a short-term decline in gold prices due to profit-taking by investors following the record high. “For the first time in many months, the risk for gold investment positions is skewed to the downside… Our money flow analysis suggests the potential for further gold price declines, and the bullish market momentum may pause,” the report stated.
