'There's a big punch to gold'

FED raises interest rates, gold price "roller coaster"

The FED raising interest rates has been the most mentioned phrase in the past month. As predicted, last night, during US trading hours, the US Federal Reserve (FED) announced information that the market had predicted. The USD interest rate increased for the 11th consecutive time to a record high.

While the stock and foreign exchange markets reacted quickly to the news of the FED raising interest rates, the gold market was quite “calm”. On the night of July 26, the price of gold fluctuated very slightly.

At the beginning of the session on July 27, in the US market (evening of July 26, Vietnam time), at the opening hour, the precious metal increased sharply, surpassing 1,980 USD/ounce - recording the highest level in 1 week.

However, very quickly afterwards, the gold price suddenly reversed and “fell vertically”. On the evening of July 27, the world gold price decreased by 29.5 USD/ounce, equivalent to 1.5%, down to only 1,942.2 USD/ounce.

Phillip Streible, chief market strategist at Blue Line Futures in Chicago, said there was a “big push” for gold. Photo: Getty Images

The market on Thursday morning appeared to have had a relatively muted reaction to the 25 basis point rate hike from the Fed on Wednesday afternoon. Fed Chairman Powell’s comments at his press conference were seen as neither too hawkish nor too dovish, and the market did not react in a big way.

Some Fed watchers think the central bank is now done with its rate hike cycle, while others think the Fed will make another rate hike in November.

Asian and European stock markets were mostly higher in overnight trading. US stock indexes are headed for a higher open as the New York session begins. The indexes are at or near their yearly highs amid a summer rally.

“There is a strong punch to gold”

The reason for the "sinking" of the precious metals market was not because the FED raised interest rates but because of bright US economic data.

New US economic data released on Thursday morning (July 27 evening Vietnam time) included: US gross domestic product in the second quarter is estimated to have increased 2.4% compared to the same period last year, quickly beating market expectations of a 2.0% increase. The GDP report's internals were also solid.

Meanwhile, US durable goods orders were reported to have risen 4.7% in June, compared to expectations for a 1.5% increase. In addition, US weekly jobless claims were lower than expected. The data boosted the US dollar index and pushed US Treasury yields up slightly—both of which are bearish for the precious metals market.

“There was a big punch to gold with better-than-expected initial claims numbers pointing to the strength of the recovering U.S. labor market,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

“Then the unexpected uptick in GDP data also shows you that if there is a recession, it’s not like nobody sees it right now. So it paves the way for higher rates for longer.”

Data showed the US economy grew faster than expected in the second quarter as the resilience of the labor market underpinned consumer spending.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 221,000 in the week ended July 22.

The dollar index rose 0.7% against its rivals after the data, making gold more expensive for holders of other currencies. The yield on the 10-year US Treasury note rose to 3.90%.

SJC gold price becomes expensive again

World gold prices are experiencing many ups and downs, but in the session of July 27, domestic gold prices still fluctuated slowly within a very narrow range.

SJC gold price is nearly 12 million VND more expensive than world gold price. Illustrative photo

Closing the market on July 27, the price of SJC gold at Bao Tin Minh Chau Company was listed at: 66.75 million VND/tael - 67.28 million VND/tael, up 80,000 VND/tael, equivalent to 0.12%. After a slight increase and then a slight decrease, the price of Rong Thang Long gold returned to the original level: 56.23 million VND/tael - 57.08 million VND/tael.

At the remaining gold and silver companies, the price of this precious metal has a large difference. By the end of July 27, the price of SJC gold at Doji and Phu Nhuan Groups was bought and sold at: 66.55 million VND/tael - 67.25 million VND/tael and 66.60 million VND/tael - 67.15 million VND/tael.

At Saigon Jewelry Company (SJC), SJC gold price is trading at a slightly higher level: 66.75 million VND/tael - 67.35 million VND/tael, up 150,000 VND/tael, equivalent to 0.22%.

Thus, the price of SJC gold is nearly 12 million VND more expensive than the world gold price. Meanwhile, just a few days ago, this difference was more than 10.8 million VND/tael. It can be seen that SJC gold has become expensive again.

Source: https://www.congluan.vn/co-mot-cu-dam-manh-vao-vang-post258105.html