World gold prices are facing downward pressure, 19 million VND/tael lower than domestic ones

World gold prices were pinned below the key threshold of 2,000 USD/oz in the session on Wednesday (February 14), after falling sharply a day earlier because hotter-than-expected US inflation data increased bets that The Federal Reserve (Fed) will keep interest rates higher for longer. Domestically, the spring price of gold bars is at 78 million VND/tael, about 19 million VND/tael higher than the international gold price.

At the close of last night’s trading session in New York, spot gold price decreased by 0.5 USD/oz, to 1,993 USD/oz. On Tuesday, world gold prices decreased by 27 USD/oz, equivalent to a decrease of about 1.3%.

“Gold prices are falling under the heat of CPI data. In the immediate future, gold prices are unlikely to increase because the increase past the 2,000 USD/oz mark is mainly due to the expectation that the Fed will reduce interest rates soon and a lot,” senior strategist Bob Haberkorn of RJO Futures commented to Reuters news agency.

A report from the US Department of Labor on Tuesday showed that the consumer price index (CPI) in January increased 0.3% over the previous month and increased 3.1% over the same period last year. In a previous survey by Dow Jones news agency, economic experts forecast a monthly increase of 0.2% and a yearly increase of 2.9%.

According to data from CME’s FedWatch Tool, traders are betting on a 78.5% chance of the Fed starting to cut interest rates in June. Meanwhile, the possibility of the Fed cutting interest rates from May 5 decreased to only 38.5%, from 63.7% a week ago. The possibility of the Fed reducing interest rates from March is almost gone.

In addition, the market also believes that the Fed can only reduce interest rates 2-3 times this year, instead of 5-6 times as expected earlier this year.

Gold is a non-interest-bearing asset, so a longer-term higher interest rate environment is not beneficial for gold prices.

Speaking on Wednesday, Chicago Fed President Austan Goolsbee said inflation will continue to fall toward the Fed’s 2% target even though inflation data in the next few months may be slightly higher than expected. with expectations. He also said the Fed should be cautious about waiting too long before starting to cut interest rates.

Mr. Goolsbee’s soft comments caused US Treasury bond yields and the USD exchange rate to decrease after setting high levels, thereby relieving pressure on gold to depreciate and preventing metal prices from falling. This quarter there was a sharper decline.

The 10-year US Treasury bond yield decreased 5 basis points, to 4.267%, after reaching 4.332% during the session – the highest level since December 1.

The Dollar Index, which measures the strength of the USD against a basket of six major currencies, closed down 0.13%, to 104.72 points, after reaching a three-month high in the previous session.

Current developments  world gold last 6 months.  Unit: USD/oz - Source: Trading Economics.
World gold price developments in the past 6 months. Unit: USD/oz – Source: Trading Economics.

Mr. Haberkorn said that if there is further confirmation that the Fed cannot cut interest rates soon, gold prices will fall even deeper.

On Thursday, the market will pay attention to the January retail sales report, and on Friday, another inflation report, the producer price index (PPI), will be released. These data will continue to shape investors’ expectations about Fed interest rates, thereby affecting gold prices.

The world’s largest gold exchange-traded fund (ETF) SPDR Gold Trust continued to sell net on Wednesday, with a net sale of about 1.5 tons of gold, reducing its holdings to more than 839 tons of gold. On Tuesday, the fund also released 1.5 tons of gold. Last week, this fund net sold about 10 tons of gold, maintaining this year’s net selling trend.

Domestically, many jewelry businesses reopened this morning after more than a week of Tet holiday. This is the time when experts predict that the domestic gold market will be “hotter” than usual due to people’s buying of gold for good luck, pushing demand to increase sharply on the occasion of the God of Wealth Day, January 10 of the lunar calendar.

In the early morning, the retail price of SJC gold bars decreased by 700,000-800,000 compared to before Tet even though the buying price was almost flat. The price of gold rings is almost unchanged compared to before Tet at both ends.

At nearly 9 a.m., Phu Quy Group listed the price of SJC gold bars for the Hanoi market at 76.45 million VND/tael (buying) and 78.15 million VND/tael (selling). Phu Quy brand 999.9 plain round ring costs 64.5 million VND/tael and 65.7 million VND/tael, respectively buying and selling price.

At the same time, the spot price of gold in the Asian market stood at 1,994.1 USD/oz, up 1.1 USD/oz compared to last night’s closing session in the US. This price is equivalent to about 59 million VND/tael if converted at the USD selling rate at Vietcombank.

Compared to the converted world gold price, the retail price of SJC gold bars is over 19 million VND/tael higher, while the price of gold rings is about 6.7 million VND/tael higher.

Vietcombank early in the morning quoted USD price at 24,200 VND (buy) and 24,570 VND (sell).

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