US adds recession fears, gold price could set new record

On Kitco, Carsten Fritsch, a commodity analyst at Commerzbank, said he expects gold prices to hit an all-time high in the week of July 15-19. This means that spot gold will surpass the $2,450/ounce (equivalent to nearly VND76 million/tael) recorded on May 20.

Although expectations of a US Federal Reserve rate cut in September have been fully reflected in the gold price rally in recent sessions, gold will have another rally to an all-time high in the “next few days” on expectations of another rate cut later this year, according to experts from Commerzbank.

In fact, the Fed has signaled that it could cut rates once or twice in 2024. However, a few weeks ago, the timing of the cuts and whether there would be two cuts were unclear. Everything became clear until the hearing of Fed Chairman Jerome Powell on July 10.

After the Senate hearing on July 9, Fed Chairman Powell suddenly announced a change of stance in the House hearing on July 10.

Accordingly, the most powerful man in the world's financial industry announced that the Fed will not wait until inflation falls to the 2% target before cutting interest rates.

During the week, data from the US Bureau of Labor Statistics showed that the US consumer price index (CPI) fell to 3% over the past 12 months. This is the lowest level in more than 3 years (since April 2021) and lower than the expected 3.1% and the 3.3% recorded in May.

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World gold prices are forecast to reach a new historical peak in the week of July 15-19. Photo: HH

Although still far from the 2% target, inflation is no longer the only concern of the Fed. It is the possibility of a recession in the US economy with not very positive signals from the country's labor market.

“Higher inflation is not the only risk we face,” Powell stressed.

Robert Minter, Director of ETF Strategy at Abrdn, said the US labor market is slowing and the Fed needs to act now before it's too late.

According to Naeem Aslam, chief investment strategist at Zaye Capital Markets, at this point, the possibility of the Fed cutting interest rates in September is almost certain, although the US will release some important economic reports next week. But analysts do not expect any data that can significantly impact the market.

In fact, the market is pricing in a 96.2% chance that the Fed will cut interest rates on September 18.

This will continue to support the new momentum of gold.

Domestic gold rings surpass SJC gold bars, will they continue to increase?

In the trading session on July 12, the price of gold rings surpassed SJC gold bars for the first time. The price of 24K plain rings at many brands skyrocketed and for the first time in many years, it was higher than SJC gold bars.

Meanwhile, SJC gold bars continued to move sideways at 76.98 million VND per tael for over a month, after the State Bank kept the intervention price for SJC and 4 state-owned banks unchanged at 75.98 million.

This development was also predicted by some experts. The demand for gold is still there, while buying SJC gold bars is not easy to meet, gold rings are considered an option. The converted world gold price has reached nearly 76 million VND/tael.

Globally, the US dollar is weakening rapidly following monetary policy signals and could push gold prices up further.

According to Naeem Aslam, the tension in the US labor market could cause real problems for the world's No. 1 economy. Therefore, the Fed will not be able to act too late (in cutting interest rates).

Investors will be focused on the European Central Bank (ECB) this week, which is likely to leave interest rates unchanged after cutting them in June, but is likely to signal a cut in September.

If this happens, with a more dovish stance, the euro could weaken against the dollar, pushing the greenback higher. This would act as a brake on gold’s rise.

Still, analysts say not much will change. The big picture remains an upward trend in gold prices amid falling global interest rates. The return of inflation is also a supportive factor.

The World Gold Council (WGC) also noted this week that investment demand picked up in Europe in June, coinciding with the ECB's rate cut.

In North America, the biggest report due is June retail sales data. Economists say any weakness in consumer spending will add to expectations of a Fed rate cut.

US changes stance, gold price soars: What is the target for 2024? Gold price skyrocketed after the US announced a decrease in inflation and the Fed made important changes in its policy stance. If the US cuts interest rates, gold price is likely to increase sharply.