Gold prices fell sharply because of the Fed, but the market may turn on "defense mode" for this reason

Gold prices today, July 7, 2023, may retest the support level of $1,914/ounce, with a high probability of falling to the $1,903-$1,909/ounce range, according to Reuters technical analyst Wang Tao. However, new tensions in US-China relations are a major unknown factor for the precious metals market.

LIVE UPDATE TABLE OF GOLD PRICES AND EXCHANGE RATES TODAY, JULY 7TH

1. SJC - Updated: 06/07/2023 15:43 - Time of issue on source website - ▼ / ▲ Compared to yesterday.
Type	Buy	Sell out
SJC 1L, 10L	66,450	67,050
SJC 5c	66,450	67,070
SJC 2c, 1C, 5 phân	66,450	67,080
SJC 99.99 gold ring 1 chi, 2 chi, 5 chi	55,050	56,050
SJC 99.99 gold ring, 0.5 tael	55,050	56,150
99.99% Jewelry	54,950	55,650
99% Jewelry	53,899	55,099
Jewelry 68%	35,996	37,996
Jewelry 41.7%	21,358	23,358

Global gold prices fell following a strong jobs report, exceeding expectations in the US labor market. The newly released data showed that the number of jobs increased more than double market expectations. This report pushed the US dollar index back from its lowest point and also pushed up US Treasury yields.

According to TG&VN 's report at 9:30 PM on July 6th (Vietnam time), the price of gold was trading at $1,928.2 USD/ounce. Last time, August gold futures fell by $11.70 USD to $1,915.70 USD.

Specifically, the US jobs report for June showed an increase of 497,000 jobs, compared to expectations of only 220,000. The yield on the benchmark 10-year US Treasury bond rose to its highest level in nearly four months, currently standing at 4.031%. This data reinforces the hawkish stance on monetary policy – supporting the Federal Reserve (Fed) raising interest rates.

Meanwhile, the latest Fed policy meeting minutes were released Wednesday afternoon, and they also tended to be hawkish. According to the minutes from the June 13-14 meeting, most Fed officials believe that keeping the benchmark interest rate unchanged at 5.0-5.25% is "appropriate and acceptable," with some advocating a 0.25% increase. The minutes also indicated that "almost all" FOMC members agreed that further tightening of US monetary policy is necessary this year.

Gold price today, July 7, 2023: Gold prices fell sharply due to the Fed's stance, continuing to face downward pressure and potentially returning to the $1,900 level. (Source: Kitco)

Rising interest rates will increase the opportunity cost of holding non-yielding assets like gold. In addition, investors are also closely watching developments surrounding China's imposition of export restrictions on key metals used in semiconductor manufacturing, ahead of US Treasury Secretary Janet Yellen's visit to Beijing.

According to expert Yeap Jun Rong, a market strategist at IG , increased tensions between the US and China could cause the market to "switch to defensive mode," thereby driving short-term safe-haven flows into gold.

Domestic gold prices unexpectedly increased slightly by approximately 50,000 - 100,000 VND per tael at some retail outlets nationwide.

Converting the world gold price using the USD exchange rate at Vietcombank (1 USD = 23,870 VND), the world gold price is equivalent to 55.11 million VND/ounce, which is about 11 million VND/ounce lower than the selling price of SJC gold.

Summary of SJC gold prices at major domestic gold trading brands at the close of trading on July 6th.

Saigon Jewelry Company listed the price of SJC gold at 66.45 - 67.07 million VND/ounce.

Doji Group currently lists SJC gold price at: 66.40 - 67.00 million VND/tael.

Phu Quy Group listed gold at: 66.45–67.05 million VND/ounce.

PNJ system listed at: 66.45 - 66.95 million VND/tael.

The price of SJC gold at Bao Tin Minh Chau is listed at: 66.46 – 67.03 million VND/ounce; the Thang Long Dragon gold brand is trading at 55.44 – 56.29 million VND/ounce; and the price of gold jewelry is trading at 54.95 – 56.05 million VND/ounce.

Could gold prices fall below $1,900 per ounce?

On the international market, gold is under downward pressure as the US dollar and US Treasury yields both rise due to expectations that the Fed will keep interest rates high for longer. The latest US labor market data also suggests an increased likelihood of a hawkish Fed, further putting downward pressure on gold prices.

However, some analysts have recently been optimistic that gold prices have held above $1,900 per ounce amid the Fed's projection of two more interest rate hikes this year. They argue that if this crucial psychological threshold is not maintained, a gold sell-off could occur.

In a move indicating investor caution regarding the outlook for gold prices, the world's largest gold exchange-traded fund (ETF), SPDR Gold Trust, sold a net 4 tonnes of gold on Wednesday (July 5), reducing its holdings to 917.9 tonnes.

Market outlook: Edward Moya, senior analyst at OANDA, believes that if the $1,900/ounce mark is breached, there will be a significant technical sell-off in the gold market. One reason gold has held firm above $1,900/ounce is that the market has yet to fully reflect the possibility of two more interest rate hikes by the Fed.

“Will inflation become more persistent, and will the Fed implement two more interest rate hikes? Has that possibility been priceed down yet? Not at all,” Moya said. In his view, gold isn't very attractive right now, but its price could still surge if the market reassesses the Fed's aggressive approach to combating inflation.

“The Fed’s interest rate hikes typically drive down gold prices. But given the current market conditions, we could see a stock market sell-off and a strong return of safe-haven demand for gold. This is absolutely not an environment where gold will collapse,” Moya said.

The veteran OANDA expert is predicting that gold prices will continue to trade within a narrow range in the short term, with the risk of further declines if prices fall below $1,900 per ounce. "If gold prices fall below that level, things could get worse. But I don't think that will happen," he said.

According to data from the CME FedWatch Tool, speculators are betting on a near 90% chance that the Fed will raise interest rates by 25 basis points in July and a 70% chance that the Fed will pause rate hikes in September.

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