Gold prices surge dramatically; experts advise caution.

Since the beginning of October, the price of SJC gold bars has increased by 4 million VND/ounce, reaching 89 million VND/ounce, while the price of gold rings has also reached a new peak, increasing by 1.4 million VND/ounce. According to you, what are the reasons for this increase?

On October 21-22, the world gold price reached $2,732/oz. This is equivalent to approximately 83.3 million VND/ounce. Since domestic gold prices are entirely dependent on world gold prices, it is understandable that domestic gold prices, including gold bars and gold rings, increase in line with world gold prices.

Assoc. Prof. Dr. Dinh Trong Thinh.

The price of gold on the world market is rising due to several reasons:

Firstly , it's due to the conflict between Russia and Ukraine. This is a very important issue because the conflict disrupts the world's supply chains, causing the prices of raw materials for production and business to rise. When production becomes difficult, people buy and hoard more gold.

Furthermore, the conflict between these two countries significantly reduced the supply of gold, as Russia is a major gold producer in the world. When conflict occurs, Russia is surrounded and subjected to sanctions, making it difficult to sell gold to the world, and a reduction in supply is inevitable.

Secondly , the decline in the value of the US dollar following the Federal Reserve's 0.5 percentage point increase in the benchmark interest rate also contributed to the rise in gold prices. Recently, inflation has decreased, leading the US government and many countries around the world to implement tight monetary policies, raising interest rates. Raising interest rates means the currency depreciates against other currencies, and especially against gold. This interest rate increase has led speculators and investors to expect gold to appreciate more against the US dollar.

Based on previous research, I've observed three instances of rising USD interest rates that significantly boosted expectations of gold prices against the USD, increasing them by at least 22%. The highest increase was 32% against the USD. Currently, expectations for gold price increases are even higher. This is especially true in the context of the Russia-Ukraine conflict, with Western countries imposing economic sanctions on Russia and preventing its participation in SWIFT. As a result, many countries around the world, including Russia, recognize that holding USD, and other strong currencies like the British pound and the euro, carries high risks. Therefore, central banks in many countries are shifting from holding USD reserves to gold reserves. This increases demand for gold, driving up its price.

Between last year and this year, people in Asia, especially in China, India, and Vietnam, have increased their gold purchases (including gold bars and gold rings). This has also caused the price of gold to rise globally.

Thirdly , one of the recent factors is the conflict between Israel and Iran and its proxy forces in the Middle East, which has also caused investors to worry and seek refuge in gold as a safe-haven asset.

All of the above factors have fueled a sharp increase in gold prices. Since the beginning of 2023, world gold prices have risen by more than 20%. Therefore, when world gold prices rise, domestic gold prices cannot remain stable because domestic gold production is negligible, with most imports coming from the world.

Some international experts believe that the growing "fear of missing out" (FOMO) in the gold market could be a sign of a "bubble." In your opinion, could the price of gold rings create a "bubble" similar to the price of gold bars in the past?

Currently, the gap between the price of gold bars or gold rings and the world gold price is small, around 3-4 million VND/ounce. This is normal.

In reality, this isn't a bubble because it's still closely tracking world gold prices. The upward trend in gold has just begun, and retail investors haven't yet entered the market significantly. I believe FOMO will emerge when the price approaches the $3,000/ounce mark.

Given the current upward trend in gold prices, do you think people and investors should invest in gold?

According to forecasts, gold prices are expected to continue rising in the near future due to the US government's interest rate hikes. Therefore, the expectation of a depreciating US dollar against gold remains, not to mention the potential for global conflicts, and the likelihood of gold prices increasing is still very high.

People should exercise caution before buying or selling gold. Photo: Phuong Cuc

Gold prices could continue to rise, and this increase could last until the end of 2024, potentially reaching $2,800/oz, or even $2,850/oz.

Therefore, the decision to buy or hold gold depends on individual forecasts, financial capabilities, and needs.

For savvy and flexible investors, buying to "flip" during turbulent times like this can yield significant profits. However, the current price of gold is very high and unpredictable. Therefore, if people lack sufficient knowledge and experience to make large investments, they should be cautious and think carefully before engaging in any gold buying or selling activities.

On the other hand, given Vietnam's relatively strong economic development, investment opportunities in other sectors are also very good, especially in the stock market. This is because when production grows, stock prices rise, and the Vietnamese currency remains stable. Therefore, investors should compare and consider investing in different sectors to achieve the highest possible return on investment.

Source: https://congthuong.vn/gia-vang-tang-dung-dung-chuyen-gia-khuyen-hay-can-trong-354135.html